How is a mortgage installment calculated?
With a reducing balance (the norm for home finance), profit is charged each month only on what you still owe. Early installments are mostly profit, and the principal share grows over time. Open "Yearly repayment schedule" in the result to see it.
With a flat rate, profit is charged on the full amount for the whole term. A 3% flat rate is equal to a much higher reducing rate, so always compare offers by APR.
Example: a SAR 900,000 property, 10% down, SAR 810,000 financed over 25 years at 5.5% reducing: about SAR 4,974 a month.
Other costs when buying
Besides the down payment: the 5% real estate transaction tax (paid by the state for a citizen's first home up to SAR 1M), brokerage if there is an agent, and valuation and insurance fees set by the bank. Sakani beneficiaries may get profit support that lowers the installment.
FAQ
How much is the down payment for a mortgage in Saudi Arabia?
Usually at least 10% of the property value for a first home, and more for other homes. It can be lower for Sakani beneficiaries depending on the product.
What is the difference between flat and reducing rates?
A flat rate is charged on the full amount for the whole term; a reducing rate only on the remaining balance. At the same rate, flat costs much more.
Can I pay off my mortgage early?
Yes, early settlement is allowed. The bank may charge limited compensation for reinvestment cost under the contract. Ask your bank how it is calculated.
This is an estimate. Your actual installment and allowed salary deduction are set by the bank based on your income, commitments and the finance offer.