Mortgages in Saudi Arabia: All-in-one Guide

In Saudi Arabia or any other country in the world, a mortgage is a formal agreement where a bank or lender holds a claim on your property as security for a loan. This setup ensures the lender's protection, allowing them to claim the property if the loan isn't repaid. 

If you're interested in learning more about how mortgages work in Saudi Arabia, continue reading this blog post

Table of Contents

• Overview about Mortgages in Saudi Arabia
• Key Mortgage Requirements in Saudi Arabia
• Steps to Obtain a Mortgage in Saudi Arabia
• 5 Mortgage Options to Consider in Saudi Arabia

Mortgages in Saudi Arabia: Legal Aspects

1- Mortgage Scope: When you mortgage a property, it’s not just the land that's covered. The mortgage includes buildings, plantations, and any later additions or improvements. 

2- Lender's Rights and Borrower's Responsibilities: The lender has a range of rights to safeguard their investment. If anything endangers the value or safety of the property, they can step in. As a borrower, it's your responsibility to take good care of the property. 

3- Transfer and Termination of Mortgage:  Lenders have the flexibility to pass on their mortgage rights to others, based on the terms you both agree upon. Typically, a mortgage comes to a close once the loan is completely paid, the property is no longer there, or if you and the lender mutually decide to end it.

4- Priority in Repayment:  If there's a situation where you're unable to repay the loan and the property needs to be sold, the lender is first in line to receive payment from the sale. This arrangement is in place to protect the lender's investment, ensuring they recover their funds, especially in cases of loan default.

Key Mortgage Requirements in Saudi Arabia

When considering a mortgage in Saudi Arabia, it’s important to be aware of several key requirements. Here’s a breakdown of what you need to know:

1- Property Ownership: The property you want to mortgage should be in your name or the name of a guarantor who’s backing your loan.

2- Property Value: It's essential that the property's value is sufficient to cover the amount of the loan you're seeking. For an accurate evaluation, consider hiring a professional real estate appraiser. Alternatively, you can use online valuation tools like "Estate Meter." These tools can provide a quick estimate of your property’s worth, especially useful if your property is in Saudi Arabia, Kuwait, or Bahrain.

3- Limitations on Alterations: Until your mortgage period ends, avoid any major renovations or changes that might affect the property’s value.

4- Handling Property Value Increases: If your property value goes up, the extra worth remains yours.

5- Dealing with Value Decreases: If the property value falls, you might need to cover the difference, even if you’ve been making regular payments.

6- Mortgage Continuity in Case of Death: If either the lender or borrower passes away, the mortgage terms still stand and will pass on to their heirs or appointed representatives.

Steps to Obtain a Mortgage in Saudi Arabia

1- Contact Your Bank:. Your bank will provide initial guidance and clarify the legal requirements for mortgaging your property in Saudi Arabia.

2- Gather Your Documents: typically including proof of income, property documents, and identification papers.

3- Submit Your Application: This step includes providing your financial details, property information, and the amount you wish to borrow.

4- Property Evaluation: The bank will conduct a valuation of your property to determine the loan amount.

5- Bank Application Review: In this step, the bank will determine whether your income is sufficient to cover the mortgage payments. Banks will assess your income stability and debt-to-income ratio.

6- Register Your Mortgage: In Saudi Arabia, as in many countries, legal registration of the mortgage is an important final step to make the agreement official and legally binding.

5 Mortgage Options to Consider in Saudi Arabia

1- Al Rajhi Bank Mortgage

Features

• Long Financing Duration: You can get financing for up to 25 years.
• Islamic Financing: The financing complies with Shariah principles.
• High Loan Limits: You can borrow up to SAR 5 Million.
• Age Flexibility: Available for customers up to 70 years old.
• Stable Profit Rates: The profit margin is competitive and doesn't change.
• For All Customers: Whether you transfer your salary to the bank or not, and regardless of your employer's status.
• Financial Protection: If you face death or disability, your remaining finance is waived.
• Flexible Payments: You can choose from various installment plans.
• Fast Approval Process: Approvals are quick.
• Initial Break Period: You get a grace period of up to 3 months before starting payments.
• Co-Borrower Option: Available for customers not covered by the REDF.

Terms and Conditions

• Saudi nationality only.
• Minimum age of 18.
• Minimum service of 3 months.
• Salary starts from SAR 7,000 for salary transfer and SAR 10,000 for non-salary transfer.

Required Documents

• Salary transfer statement from employer.
• Copy of the title deed.
• Monthly expense declaration form.
• Valid ID.
• Salary certificate from employer.
• Sketch of property location.

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2- Bank Albilad Mortgage

Features

• Sharia-compliant financing service.
• Ability to choose Shariah-approved shares from the local market.
• Early settlement option.
• Financing period up to 25 years, extendable to 30 years for beneficiaries of the Ministry of Housing or REDF​​.

Terms and Conditions

• Customers must be 21 years or older.
• Available to Saudi nationals only.
• Customers must have a current account with Bank Albilad.
• Must be employed in a public or private sector approved by Bank Albilad.
• Customer's salary should be at least 3,000 SAR​​.

Required Documents

• Valid ID (additional ID copy for military employees).
• Disclosure form.
• Financing form.
• Employer's letter indicating salary, job title, and employment date.
• Salary transfer statement.
• Property documents: title deed copy, building permits, and property location sketch​​.

Fees

• Management fee of 1% of the financing amount, capped at SAR 5,000​​.

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3- Bank Saudi Fransi Mortgage

Features

• Shariah-compliant product in the form of Tawarruq.
• Fixed profit rate for the entire term.
• Option to mortgage various property types: villa, duplex, townhouse, apartment building (must be owned by the customer and not already mortgaged).
• The property is mortgaged only by the finance amount and remains under the customer’s name.
• Funding possible up to the age of 75 years.
• Step-down payments on retirement, with reduced installments after retirement in line with the pension.
• Exemption from remaining repayments in case of death or permanent disability.

Eligibility Criteria

• Minimum age of 20 years.
• Requirement to open a current account if not already held.
• Minimum monthly net income of SAR 5,000.
• Salary transfer through SARIE.

Required Documents

• Copy of the title deed.
• Copy of the construction permit.
• Valid ID copy of the seller.
• Location sketch of the property.
• Completed and signed mortgage application.
• Copy of a valid ID of the customer.
• Detailed salary certificate mentioning allowances (if any).
• Pay slip of the last three months for semi-government or private sector employees.
• Account statement for the last three months indicating salary receipt.

Fees

• Administrative fees are 1% of the financing amount or SR 5,000, whichever is lower.

4- The Saudi Investment Bank (SAIB) Mortgage

Features & Benefits

• No down payment required, property value considered as down payment.
• Finance Amount: SAR 350,000 – SAR 7,000,000.
• Payment Period: 60 – 360 months.
• End-to-End digital application through mobile application.
• Sharia-compliant based on Murabaha.
• WooW points.
• Free Takaful Life Insurance coverage against death or permanent disability.
• Free Takaful Home Insurance coverage against disasters like fires, floods, storms, earthquakes​​.

Eligibility

• Saudi nationals only.
• Age: Minimum 23 years, Maximum 70 years (at maturity).
• Salary Account with The Saudi Investment Bank.
• Service period: 3 months in Government Sector and 12 months in Private Sector​​.

Required Documents

• Valid ID copy.
• Required forms filled by the bank.
• Salary assignment letter to The Saudi Investment Bank.
• Introduction letter from employer (salary, allowances, date of joining).
• Additional documentation based on the property type​​.

Fees

• Administration Fee: 1% of finance amount or SAR 5,000 (whichever is less)​​.

5- Riyad Bank Mortgage

Features & Benefits

• Sharia-Compliant: The program adheres to Islamic financing principles.
• Competitive Profit Margins: Offers attractive profit margins.
• Flexible Payment Plan: Provides flexibility in monthly installments.
• Credit Counseling: Available for customers.
• Quick Evaluation: Authorized evaluator sent within the same day.
• Funding Before Salary Depositing: Option to receive funding before salary deposit.
• Insurance: Cooperative insurance against all risks.
• Exemption in Case of Death or Disability: Transfer of ownership to heirs as per insurance coverage.
• High Age Limit for Financing: Up to 77 years for Governmental and Private sector, and 75 years for Military sector.
• High Financing Amount: Up to SAR 5 million.
• Multiple Finances: Possibility of having more than one finance.
• Early Settlement Option: Available for customers.

Program Types

• Home Equity Readymade Property: For customers seeking cash against mortgaging their property.
• Home Equity Incomplete Property: Provides financing solutions for incomplete properties, enabling continuation of construction works.

Required Documents

• Copy of valid Saudi national ID.
• Completed application form for Home Finance.
• Applicant undertaking form.
• Applicant health declaration.
• Salary certificate with salary details.
• Bank statement.
• Deposit of valuation fees.

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