Loan-to-Value (LTV)
Synonyms: LTV Ratio، Financing-to-Value Ratio، Maximum Financing Ratio
Last updated: 2026-09-25
Short Definition
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%.
Overview
Legal Basis
The basis is Article 11 of the Implementing Regulation of the Real Estate Finance Law (Royal Decree No. M/50 dated 13/8/1433H), which sets 70% and allows SAMA to change it, together with SAMA circulars No. 371000064087 dated 6/6/1437H (85% for real estate finance companies), No. 381000039082 dated 10/4/1438H (85% for citizens' first homes) and No. 391000048362 dated 27/4/1439H (90% for citizens' first homes only; 70% at banks and 85% at real estate finance companies for second and subsequent homes).
Practical Example
A citizen wants to buy a SAR 1,000,000 apartment in Riyadh. If it is his first home, the maximum finance is 90%, i.e. SAR 900,000, with a SAR 100,000 down payment. If he already owns a home and is buying this as a second home with bank finance, the cap is 70%, i.e. SAR 700,000, with a SAR 300,000 down payment (or SAR 150,000 at a real estate finance company with an 85% cap). For a first home, if the accredited valuer values the apartment at SAR 950,000 and the lender relies on that valuation, the maximum finance becomes SAR 855,000 and the down payment rises to SAR 145,000. So it pays to wait for the valuation before finally committing to the price with the seller.
Common Mistakes
- ✗Believing the 90% ratio applies to every citizen on every purchase, when it applies only to the first home.
- ✗Budgeting on the purchase price instead of the valuation, which may be lower and increase the down payment.
- ✗Forgetting that the down payment is not the only cash needed: there are administrative fees, Real Estate Transaction Tax unless an exemption or state-borne relief applies, and brokerage commission.
- ✗Confusing bank caps (70% for a second home) with real estate finance company caps (85%).
- ✗Assuming the maximum ratio is granted automatically, when the lender may approve less based on income and risk.
International Differences
Most central banks use LTV caps as a prudential tool: in the UAE caps differ between nationals and expatriates and by property value and whether it is a first home; in Turkey limits are linked to the home's value and classification; and in many European countries limits are prudential recommendations rather than hard rules. In the US LTVs above 80% are possible with private mortgage insurance. Saudi Arabia stands out for its clear distinction between a citizen's first home (90%) and second homes, and between banks and finance companies.
