Real Estate Financing
34 terms in this category
Amortization Schedule
An amortization schedule is a table showing every installment of a financing with its due date and amount, how it splits between profit (term cost) and principal, and the balance remaining after each installment, until the balance reaches zero at the end of the term.
Balloon Payment
A balloon payment is a final installment much larger than the regular ones, because part of the principal is deferred to the end of the term rather than spread across the installments — lowering the monthly payment but concentrating the obligation at maturity.
Bridge Loan
A bridge loan is short-term financing that covers a temporary timing gap — such as buying a new property before selling the old one, or funding a developer until long-term financing arrives — and is repaid from a specific expected source such as a sale.
Co-Borrower
A co-borrower is a second person who signs the home finance contract with the main borrower and whose income is combined with his to raise the possible finance amount, becoming obliged to the lender to repay as the contract provides, usually on a joint and several basis.
Construction Loan
A construction loan is financing released in tranches tied to completed and verified construction stages, rather than as a single lump sum, to build a home on land the borrower owns or to deliver a real-estate project, and then repaid in regular installments under the contract.
Credit Bureau (Simah)
The Saudi Credit Bureau (SIMAH) is the Kingdom's first licensed credit information company, collecting credit data on individuals and businesses from members such as banks, finance and telecom companies and issuing credit reports and scores to lenders under Saudi Central Bank supervision.
Credit History
A credit history is a documented record held by a licensed credit bureau containing a person's current and past credit dealings, such as finance, cards, installments and guarantees, and how regularly he has repaid, which lenders review with his consent before granting finance.
Credit Score
A credit score is a statistical number calculated by a credit bureau from an individual's credit record, expressing the likelihood that he will repay in the future, and lenders use it as one of the factors in deciding whether to grant finance and on what terms.
Debt-to-Income Ratio
The debt-to-income ratio (deduction ratio) is the ratio of a borrower's total monthly credit obligations to his total monthly income, used by lenders to assess repayment capacity and to set the maximum new installment that can be granted.
Escrow Funds
Escrow funds are money deposited with a neutral third party — usually a dedicated bank account — and released to the entitled party only once agreed or legally defined conditions are met, protecting the payer from losing the money and reassuring the recipient that it is available.
Fixed Rate
A fixed rate is a profit rate (term cost) set when the financing contract is signed that does not change for its whole term — or for an agreed initial period in hybrid products — so the monthly installment stays constant and known in advance whatever happens to market rates.
Foreclosure
Foreclosure is the legal process by which a mortgagee recovers an unpaid debt through a court-supervised forced sale of the mortgaged property, paying the debt from the price according to the mortgage’s ranking and returning any surplus to the owner.
Home Equity Loan
A home equity loan is financing secured by a registered mortgage on a property the borrower already owns, sized on its “equity” — market value minus any outstanding financing — and used for purposes other than buying a home, such as renovation, education or a business.
Ijara
Finance ijara (ijara ending in ownership) is a financing structure in which the financier owns the property and leases it to the customer for a set period at periodic rent, with ownership passing to the customer at the end by gift or sale as the contract provides.
Interest Rate
An interest rate is the cost of borrowing money expressed as an annual percentage of the amount borrowed; it is set in the market under the influence of the central bank's policy rates, interbank lending costs and the borrower's risk, so central banks do not set it directly for individuals.
Islamic Financing
Islamic real estate financing is property finance built on Sharia-compliant contracts such as murabaha, ijara ending in ownership, diminishing musharaka and tawarruq, so the financier's return is profit from a sale, rent or partnership tied to a real asset rather than interest on a cash loan.
Loan Application
A loan application (home finance application) is the formal request a prospective borrower submits to a licensed bank or finance company, containing personal, financial and property data and supporting documents; it is the basis for assessing creditworthiness and issuing a finance decision.
Loan Default
Loan default is a borrower’s failure to pay financing installments on the dates set in the contract; it begins with a single missed installment and can develop into persistent default that entitles the financier to start collection and then enforce against the security.
Loan Modification
Loan modification is a written agreement between financier and borrower to change the terms of existing financing — such as extending the term, lowering the installment or granting a grace period — to make repayment easier before arrears turn into default.
Loan Tenure
Loan tenure is the period agreed in the contract for fully repaying a home finance through periodic installments; it directly affects the monthly installment and the total cost of finance: the longer the term, the lower the installment and the higher the total profit paid.
Loan-to-Value (LTV)
Loan-to-value (LTV) is the ratio of the home finance amount to the value of the financed property, which in turn sets the minimum down payment the buyer pays from his own funds; a 90% LTV means financing 90% of the value and paying at least 10%.
Mortgage Escrow Account
A mortgage escrow account is a lender-managed account, common with US mortgages, into which part of each monthly payment is set aside to pay the borrower’s annual property taxes and insurance premiums on time, protecting the collateral.
Mortgage Installment
A mortgage installment is the periodic amount a borrower pays the financier each month to repay a home finance, made up of part of the principal and part of the term cost (profit or interest); it stays fixed under fixed-rate finance and changes at each repricing under variable-rate finance.
Mortgage Insurance
Mortgage insurance is cover that protects the financier against loss if the borrower cannot pay or the debt cannot be fully recovered; in the US it is known as private mortgage insurance (PMI), typically required when the down payment is below 20% and paid for by the borrower.
Mortgage Rate
A mortgage rate is the annual cost rate of a home finance that the financier charges for deferred payment; in Islamic finance it is called the profit margin or term cost, and it must also be shown as an annual percentage rate (APR) that includes unavoidable fees.
Murabaha
Real estate murabaha is an Islamic financing structure in which the financier buys and takes ownership of the property the customer has chosen, then sells it to him at a deferred price equal to cost plus an agreed profit, repaid in fixed installments.
Musharaka
Diminishing musharaka is an Islamic financing structure in which the customer and the financier co-own the property and the customer gradually buys out the financier's share until he owns it fully, usually also paying rent on the financier's share meanwhile.
Pre-Approval
A mortgage pre-approval is a conditional preliminary assessment issued by a lender after reviewing the applicant's income, obligations and credit record, indicating roughly how much finance is possible before a property is chosen; it is not a final commitment to lend.
Prepayment Penalty
A prepayment penalty is compensation a financier charges when a borrower repays all or part of a financing before it falls due, for the profit it forgoes or the cost of reinvesting the money.
Real Estate Finance
The activity of extending credit to buy or build property, governed by the Real Estate Finance Law and its regulation as amended by Minister of Finance Decision 1144 dated 02/06/1443H, under Saudi Central Bank supervision.
Real Estate Insurance
Real estate insurance is a policy that covers a building, and sometimes its contents, against physical perils such as fire, water leaks, natural catastrophes and theft — often with third-party liability and loss-of-rent cover — in return for an annual premium.
Real Estate Mortgage
A real security recorded over a property to guarantee a debt, governed by the Registered Real Estate Mortgage Law under Saudi Central Bank supervision, and recorded with the competent body to be enforceable against third parties.
Refinancing
Refinancing is replacing an existing home financing with a new one — with the same financier on revised terms, or by moving the debt to another financier that pays off the first — usually to cut the profit rate, switch between fixed and variable pricing, or change the term.
Variable Rate
A variable rate is a profit rate (term cost) in a financing contract that is recalculated periodically according to an index or reference rate named in the contract plus a fixed margin, so the installment rises or falls as the index moves during the financing term.
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