A comprehensive real estate finance guide in Saudi Arabia: Compare banks, terms, and steps to own your home

Dreaming of owning your own home? Your guide to making the right decision

Owning a dream home is the ultimate goal for many in Saudi Arabia. But with so many banking options and financing programs, the journey to Real estate financing Complex and confusing.

Are you confused between Al Rajhi Bank and Al Ahli Bank offers? Are you wondering "What exactly is subsidized financing?" Or "Do I qualify for the required conditions?" You are not alone. Looking for "real estate finance" doesn't mean looking for a loan, it means looking for a reliable partner for a years-long journey.

In this comprehensive and unbiased guide, we'll take you step by step. This article is not an advertisement for a particular bank, but a roadmap for you. We will help you Understanding terminologyandComparison of offers Clearly, knowing Terms required, andSteps The process from the moment you think about buying until you receive the key to your home.

What is real estate finance? Your guide to understanding the basics before you buy

Before getting into bank comparisons, it's essential to understand what exactly a mortgage is and how it differs from other financial products. Understanding these basics is your first step towards making a sound financial decision.

What is the difference between a mortgage and a mortgage?

There is a common confusion between the terms "real estate finance" and "mortgage." In fact, they are two sides of the same coin with a subtle difference in implementation, especially in the context of Islamic finance followed in the Kingdom.

• Real estate financing (Murabaha or Ijara): is the most common procedure. Here, the bank or lender By purchasing the property you choose (be it a villa or an apartment) and then Resell it to you For monthly installments plus Agreed profit margin (this is known as Murabaha). Or the bank owns the property and leases it to you for a specific period that ends with you owning the property (this is known as Ijarah Muntahilik).
• Mortgage: This term is more accurately used when the drug Already owned by you and would like to receive cash in exchange for Pawn it as collateral for the bank. It is also used to describe a situation where a purchased property is "mortgaged" as collateral for installment payments.

After all, both terms lead to one goal: To help you own a property while guaranteeing the bank's right until the full amount is paid off.

Why choose a mortgage instead of a personal loan?

You may be asking yourself: Why can't I just use personal finance to buy a home? The answer lies in three fundamental differences that make mortgage financing the only practical option for owning a home:

1. The amount of funding: Mortgage financing is designed to cover Huge sums up to millions of riyals (usually covering 85% to 90% of the property value for a first home). In contrast, personal financing has a much lower credit limit and is not enough to buy real estate.
2. Payment period: This is the most important feature. A mortgage gives you Too long a repayment period may be up to 30 years old. This extension of the term makes the monthly installment reasonable and suitable for your monthly income. Personal finance, on the other hand, often has a maximum term of only 5 years.
3. The purpose of the funding: Real estate finance Earmarked exclusively for the purchase or construction of real estate. A personal loan is multi-purpose (for traveling, buying a car, or other commitments).

Explain the most important finance terms: Murabaha, Ijarah, and Islamic finance formulas

When looking for real estate financing in Saudi Arabia, you will find that all products are Sharia-compliant. This means that you are not dealing with "interest" (riba), but with clear sales and partnership formulas. The two most important formulas are:

• Murabaha (most common):
  • How does it work? You choose the property you want.
  • The bank buys the property from the original owner.
  • The bank by selling the property to you New price includes Original purchase price + known profit margin It is agreed upon in advance and transparently.
  • You repay this new amount to the bank in long-term monthly installments.
  • Feature: The profit margin is often fixed throughout the financing period, giving you stability in the installment amount.
• Ijara (or rent-to-own):
  • How does it work? The bank buys the property of your choice.
  • The bank retains ownership of the property and By renting it to you For a monthly "fee" (installment).
  • This contract lasts for an agreed period of time (e.g. 25 years).
  • At the end of the rental period, after all payments have been made. Ownership of the property passes to you (That's what makes it "finished").
  • Feature: They are often flexible and may be tied to a variable (declining) profit margin.

Discover the types of real estate financing available in Saudi Arabia

There is no one-size-fits-all solution. Saudi banks understand the diverse needs of the market and offer different financing programs to suit every goal, whether you're buying a ready-made home, building yourself, or even looking to transfer your debt.

Financing the purchase of ready-made units (villas and apartments)

This is the type Most requested and popular. If you find your dream villa or apartment, whether it is New from a real estate developer or Used As a sole proprietor, this is the program for you. The bank finances the purchase of this ready-to-move-in property, the appraisal is usually quick and the process is straightforward, making it the easiest option for those who want to move into their new home as soon as possible.

Self-build financing: For those who own land and want to build

Do you own a piece of land and want to build your dream home on it with your own design? Program Self-build financing Customized for you. Instead of paying the finance amount in one lump sum, the bank finances you In batches Fits with Construction milestones. The bank starts by financing the foundation phase, then the bones, then the finishes, after a certified appraiser visits the site and makes sure that each phase is completed. This ensures that the funds are spent for the intended purpose.

Off-plan financing: Owning an off-plan unit

This option has become very popular with major housing projects. Off-plan sales (or "Wafi") It means you are buying a residential unit (apartment or villa) before it was completedoften at a price lower than the price after completion. Banks provide financing for these projects in collaboration with approved real estate developers. This option features flexible down payments, but requires trust in the real estate developer and commitment to the project schedule.

Mortgage program: Cash for your property

This program is a little different. It's not for buying new real estate, it's for those who Already owns real estate (house, land, or commercial building) and would like to Cash flow to be used for other purposes (such as investing, education, or starting a business). In this case, you "mortgage" your bank-owned property as collateral for a large amount of financing, and pay it back in installments like any other financing.

Transfer of indebtedness: Want to move your mortgage to another bank?

Also known as "Debt Purchase" or "competitive financing". Let's say you got a mortgage from Bank A years ago at a high profit margin. Now, you find that Bank B is offering a better deal at a lower profit margin. The Debt Conversion Program allows Bank B to Pays off all your debts to Bank A, and you go on to become a debtor of Bank B on the new terms and most useful for you. This is an excellent move to reschedule your debts and save significant amounts of money in the long run.

How does the Real Estate Development Fund (REDF) and the Ministry of Housing support you?

One of the most important factors that changed the real estate finance market in Saudi Arabia is Generous government support provided to citizens. Understanding this subsidy is essential as it can save you hundreds of thousands of riyals.

What is the Subsidized Finance Program and how do you know if you are eligible?

Subsidized Finance Program is an initiative of Ministry of Housing and Real Estate Development Fund (REDF). The idea is simple: Instead of you bearing the entirety of the mortgage profits, the government (via the fund) by taking a large portion or all of these profits on your behalf.

• How does it work? You get your financing from the bank normally, but the real estate fund pays the profits (or part of them) directly to the bank every month.
• Support: Support may be up to 100% coverage from earnings Financing amount up to SAR 500,000.
• Who is worthy? The program is oriented For Saudi citizens Those on the lists of the Ministry of Housing and Real Estate Fund (especially those who meet the conditions of housing support and have never owned a home).
• How do you know your eligibility? The first step is to sign up for Sakani Portal online. After entering your data, the portal will immediately assess your eligibility and let you know what kind of support you are entitled to.

Steps to take advantage of the Real Estate Fund subsidy to reduce the profit margin

If you're eligible for the subsidy, the road just got a lot easier. Taking advantage of the subsidy is not done in isolation, but in cooperation with the banks. The steps are as follows:

1. Enroll in Sakani: As mentioned, this is your first portal. Create an account and check your eligibility.
2. Receive a "Certificate of Merit": After verifying your eligibility, you will receive a certificate proving that you are eligible for the subsidized financing program.
3. Go to the bank (or finance company): Choose a bank or finance company Accredited by the Real Estate Fund (Al Rajhi, Al Ahli, Al Bilad, etc.).
4. Submit a funding application: When submitting your mortgage application, provide them with the "Certificate of Entitlement" from Sakani.
5. Merge support: The bank will coordinate directly with the Real Estate Fund to incorporate the subsidy into your finance contract. The bank's calculator will show you how much you will pay and how much the fund will cover from the profits each month.

Real estate financing terms in Saudi Arabia: Are you eligible? (for Saudis and residents)

Before you start looking for a home or comparing banks, you should make sure you meet the basic conditions required by the banks and lenders, which are overseen by Saudi Central Bank (SAMA).

Salary requirements: Minimum with or without a salary transfer

Your salary is the deciding factor in determining your eligibility and the amount of financing you can get.

• Salary transfer (best): Most banks favor (and some require) Transfer your monthly salary to it. This gives the bank more security, and in return, you Lower (better) profit margin higher funding amount and faster approval.
• No salary transfer: Some banks and finance companies offer the option of financing without a salary transfer, but be prepared For higher profit margins and stricter conditions.
• Minimum salary: It varies from bank to bank and industry to industry. For example:
  • Government sector: The minimum amount of 5,000 SAR.
  • Private Sector (Authorized): It may start from SAR 7,000 to SAR 10,000.

Terms of service for government and private sector

Banks are looking for job stability to ensure the continuity of installment payments.

• Governmental and semi-governmental sector: Due to the high stability, the terms are very favorable. Some banks may only in just one month of service or once the employee is confirmed.
• private sector: The bank requires that your employer Within the list of approved organizations has. You are also required to have a minimum length of service, usually between 6 months to 12 months in the same company.

The monthly deductible: What is the maximum allowable premium?

This is a strict rule imposed by the Saudi Central Bank to protect you from excessive debt. Withholding ratio (or liability ratio) It is the maximum amount of your salary that can go towards paying off all your obligations (mortgage, personal finance, credit cards).

• In general, you should not exceed Your total installments (including the new mortgage installment) is 55% to 65% of your gross monthly salary, depending on your salary bracket and the bank's policy.
• The bank will look at your credit report in "SIMAH Find out all your current obligations before calculating your new allowed installment.

[List: Do you meet the mortgage requirements?]

Use this quick checklist to assess your readiness to apply. The more "yes" answers, the better your chances of approval:

• Are you a Saudi citizen or resident with a stable job? (Yes/No)
• Are you between the ages of 20 and 60? (Yes/No)
• Do you work in a government sector or a large, bankable company? (Yes/No)
• Is your current length of service more than 6 months (private sector) or 1 month (government)? (Yes/No)
• Is your net monthly salary more than SAR 7,000? (Yes/No)
• Is your SIMAH credit history clean and you have no defaults? (Yes/No)
• Do you have a down payment ready (usually 10% for a first home for citizens, or 30% for residents)? (Yes/No)
• Are your total current liabilities (other loans) less than 30% of your salary? (Yes/No)

Comparing the best mortgages: Al Rajhi, Al Ahli, Al Bilad, or finance companies?

This is the most important part of your journey: Choosing a funding partner. Competition is fierce between Al Rajhi Bank, Saudi National Bank (SNB), Albilad Bank, and Alinmaa Bankas well as specialized finance companies. We're here to give you an unbiased view that focuses on what really matters to you.

[Comprehensive comparison table of top bank offers]

Important note: The numbers and percentages in the following table are Approximate and illustrative They are subject to constant change based on banks' policies and promotions and the customer's credit rating. An official and up-to-date quote should always be obtained directly from the bank.

Comparing profit margins: How do you choose between fixed and variable financing?

This is a critical decision that will affect your monthly installment for years to come.

• Fixed profit margin: The profit percentage (e.g. 4.5%) is determined when the contract is signed, andRemains constant throughout the funding period (e.g. 25 years).
  • Its advantage: Full stabilization. Your monthly installment will never change, making financial planning easier.
  • Its disadvantages: If interest rates (such as SIBOR) drop in the market, your premium will remain the same.
  • Who is it for? For those who prefer total safety and don't want any surprises in their budget.
• Variable (declining) profit margin: The profit percentage is index-linked (e.g. SIBOR) and is Review it every once in a while (e.g. every year, 2 years, 5 years).
  • Its advantage: It usually starts at a lower rate than the fixed. If interest rates fall. Your monthly installment will decrease.
  • Its disadvantages: Risky. If interest rates rise. Your monthly installment will increase.
  • Who is it for? For those who expect interest rates to fall in the future and have the flexibility in their budget to withstand any potential rise.

Beware of hidden fees: Comparing management fees and appraisal fees

Don't be fooled by the "lowest profit margin". The most important factor to compare is "Annual Percentage Rate (APR)which is a mandatory figure from the Saudi Central Bank that must be disclosed by the bank. This rate includes the profit margin In addition to all other feesand gives you the true cost of financing.

• Administrative fee: imposed by the central bank not to exceed 1% of the funding amount or SAR 5,000whichever is lower. Look for offers that may waive this fee.
• Real estate appraisal fees: Before final approval, the bank will send a certified appraiser to evaluate the property. You will bear the cost of this appraisal (approximately SAR 1,000 to 3,000), which is a non-refundable fee even if financing is not finalized.

Longest repayment period: Compare financing term and maximum amount

• Duration of funding: Most major banks (Al Rajhi, Al Ahli, Al Bilad) now offer Maximum repayment period of up to 30 years. The longer the term, the lower the monthly installment, but the higher the total dividends paid in the long run.
• Maximum amount: This depends Exclusively on your paycheckyour commitments, your age. There is no fixed number for everyone. But in general, major banks such as Al Rajhi, Al Ahli, and Al Inma are known to offer high financing ceilings of up to SAR 7 million or more for those with high salaries and financial solvency.

Is salary transfer mandatory? Comparing bank terms

As we have already mentioned. Salary transfer is the best option to get the lowest profit margin and the best terms. Most competitive offers from major banks are based on salary transfer.

However, there are solutions for those who can't transfer their salaries (such as those who work for unauthorized entities or have obligations to other banks). Banks such as Country Bank And some Real estate finance companies (such as Bedaya, Sahl) may offer "no salary transfer" programs, but expect Significantly higher profit margin to compensate the bank for the additional risk.

The journey of owning your own home: Steps to apply for a mortgage

Now that you understand the basics and compare options, let's draw you a practical roadmap. This is the step-by-step journey from idea to receiving the key.

Step 1: Get pre-approved (before looking for a property)

This is the most important tip: Don't start looking for real estate before you know your budget.

Head to your chosen bank (or apply online) and request "Pre-Approval. You will submit your basic documents (Salary ID, ID) and the bank will examine your credit status (in SIMAH) and give you an initial response stating Maximum Financing Amount that you can get. This approval sets a clear budget for your research and makes you a serious buyer in the eyes of sellers.

Step 2: Find the right property and make sure it is legally sound

Once you know your budget (e.g. SAR 1.5 million), start looking for the right property. Once you've found it, there are two vital points to check before proceeding:

1. The deed (title deed): Make sure that The instrument is electronic and up-to-date (not an old-fashioned handwritten check).
2. Legal safety: Make sure there are no other mortgages on the property or inheritance issues that could hinder the transfer process.

Step 3: Real estate appraisal and signing the final contract

After the initial agreement with the seller, it's back to the bank.

1. Submit property documents: Provide the bank with a copy of the deed and property data.
2. Send the evaluator: The bank will send Certified real estate appraisal company (at your expense) to visit the property and determine its fair market value.
3. Determine the final funding amount: The bank will finance you based on Lowest value between (agreed purchase price) and (valuation price). (Example: If you agreed on 1.6 million and the appraiser only valued it at 1.5 million, the bank will finance you based on 1.5 million).
4. Sign the contract (CTA): If all goes well, a date will be set to sign the final financing contract between you and the bank.

Step 4: Empty the Deed and Transfer Ownership (Step by Step)

This is the moment. This step is now done electronically and quickly via Najiz Or with all parties (you, the seller, and the bank representative) present at the notary.

1. The seller By emptying the instrument (transfer of ownership) in your favor, and at the same time Mortgage the property in favor of the bank in the instrument itself.
2. Once the mortgage is documented, the bank By transferring the purchase amount (certified check or bank transfer) directly to the seller's account.
3. Congratulations! You have become the official owner of the property, and you start paying installments to the bank from the following month.

Don't sign the contract before reading these important real estate financing tips

A mortgage contract is a long-term financial commitment. As market experts, we offer you these golden tips that you should keep in mind before signing.

Long-term financing risk (e.g., changing profit margin)

You are committing to a contract for up to 30 years. During this time, your financial situation and employment will change, and economic conditions will change.

• If you choose Variable profit marginBe prepared to risk a rise in your monthly installment if SIBOR rises. Only choose this option if you have a "financial cushion" (savings) that can absorb any sudden increase.
• Thinking about 30 years can be overwhelming. Focus on the fact that this commitment is To build an asset (your home) It's not just a consumer religion.

The importance of takaful life and property insurance

This is not an optional feature, but an essential part of the finance contract. All Saudi banks require Islamic Takaful Insurance It covers two cases:

1. Life insurance: In the case of Death or total disability (God forbid), the insurance with full repayment of the remaining debt to the bank. This ensures that the debt is not passed on to the heirs and the house remains their property.
2. Property insurance: Covers damage to the property itself as a result of disasters (such as fire or flooding) in accordance with the terms of the policy.

Make sure you read the terms of this insurance carefully and understand what it does and does not cover.

Early repayment: When is it beneficial and what are the fees?

You may receive an annual bonus, a promotion, or an inheritance and want to use it to reduce the term of your loan. This is called With early payment (whether partial or total).

• Is it useful? Yes, very. Paying off SAR 200,000 early can save you years of installments and large amounts of future earnings.
• What are his fees? The Saudi Central Bank (SAMA) has set regulations for early repayment fees, which vary depending on the type of your contract. In general, the bank is not entitled to demand more than Earnings for the next three months. But pay attention:
  • for variable margin financing: The "next three months' profits" fee is applied is applied directly to the amount paid.
  • Financing with a fixed profit margin: The bank applies a "reinvestment cost" (a formula based on the current finance cost), provided that it also does not exceed the profits of the following three months. You should check your finance contract or consult the bank to know the exact charges applicable to you.

[Top Frequently Asked Questions About Real Estate Finance]

We've rounded up the most frequently asked questions from mortgage seekers and answered them clearly.

Is it possible to get a mortgage without a salary transfer?

Yes, it is possiblebut it's not the best option. Some banks (such as Bank Albilad) and specialized finance companies offer this product. But be prepared for the following conditions:

• Higher profit margin significantly compared to salary transfer offers.
• It may be The amount of funding available to you is lower.
• You may be required to make a larger down payment. This option is only recommended for those who cannot transfer their salaries for any compelling reason.

What is the maximum age of the property that banks accept?

This is a very important factor if you are buying a "used" property. Banks don't like to finance very old real estate.

• The general rule is that Age of the property at the end of the financing term should not exceed 50 years (up to 60 years for some banks).
• Example: If you want a 25-year financing, the current property must be no more than 25 years old (25 + 25 = 50).
• The older the property, the shorter the financing term available to you.

How can I make sure the financing is 100% Sharia compliant?

This is a legitimate concern for many. Reassurance comes from two sources:

1. The bank's Sharia Board: Every Islamic bank in Saudi Arabia (such as Al Rajhi, Alinma, Al Bilad) has Independent Sharia Supervisory Board It is made up of recognized Sharia scholars. This body reviews every financial product and issues a "fatwa" or "license" that it is Sharia-compliant.
2. Clarity of the contract: Islamic finance contracts (Murabaha or Ijara) are very straightforward. They are contracts "Sell" or "Ijara They are not "interest-bearing loan" contracts. You can request to see the Sharia Board's decision on the product before signing.

What happens to indebtedness in the event of death or total disability?

As mentioned in the tips section, this is the role of Takaful insurance attached to the financing contract. In the event of the death or permanent total disability (God forbid) of the borrower, the insurance company steps in and By paying off the entire remaining amount of the loan for the bank.

• Result: Heirs are relieved of the debt.
• Property: The property passes net to the heirs without any financial burdens.

Conclusion: Your first step towards choosing the right mortgage for you

The journey to homeownership seems long, but it starts with one clear step. You're now armed with knowledge about the types of financing, its terms, and the role of government support. It's time to turn that knowledge into action.

Start calculating your affordability with finance calculators

Before visiting any bank, your first step should be online. Go to the websites of the major banks (Al Rajhi, Al Ahli, Al Bilad) and use their Mortgage Calculator.

Enter your salary, current obligations, and age. The calculator will give you an approximate figure for the highest amount of financing you can get, and the expected monthly installment. These numbers are your compass to guide your real estate search.

Request offers from at least 3 banks before making your decision

The final golden tip: Don't settle for just your current bank!

Your current bank may be good, but another bank may offer you a better deal that will save you thousands of riyals.

1. Select At least 3 banks (e.g., your current bank, another large bank, and a specialized finance company).
2. Ask each of them "Official Quotation" based on your data.
3. Compare offers Not just based on profit margin, but based on "Annual Percentage Rate (APR)" Because it's the real number of the total cost.

Owning your own home is the decision of a lifetime. Make it smart, informed, and unhurried.

Conclusion: Your first step towards owning your dream home

Together, we've traveled a long and detailed journey through the world of Saudi real estate finance. From understanding basic terminology to comparing the most complex bank offers. Owning a home is a huge financial decision, and knowledge is your first power to make the right decision.

Let's summarize the most important points in this guide:

• Understanding the basics is key: Real estate finance is not just a loan, but a diversified product (Murabaha or Ijarah) that covers different needs such as buying ready-made, self-construction, or off-plan sales.
• Take advantage of government subsidies: Checking your eligibility for the Real Estate Fund's "Subsidized Finance" (REDF) program should be your priority, as it could save you hundreds of thousands in interest costs.
• Smart comparison goes beyond profit margin: When comparing banks (such as Al Rajhi, Al Ahli, or Albilad), focus on "Annual Percentage Rate (APR)" Because it reflects the true cost including fees, choose between fixed and variable financing based on your affordability.
• Clear steps prevent TT surprises: Start by getting "pre-approved" before looking for a property, and make sure your salary and credit history (SIMAH) requirements are met to ensure a smooth transition.

Thank you so much for taking the time to read this guide to the end. We hope we've illuminated the way and provided you with the knowledge to turn your dream of home ownership into a reality with confidence and clarity.