8 tips for choosing the best real estate financing
Tips for choosing the best real estate financing
1- Advance payment
The governments of some countries sometimes exempt those who buy a property for the first time from the down payment, which is 20%, and sometimes the down payment is reduced to 15% or 10% to support young people. All you have to do is ask and search in order to get the lowest down payment.
2- Choosing the best lender, whether it is a bank or a real estate finance company
When you want to apply for a real estate financing loan, you will find a lot of offers from many banks, never go easy and choose the most famous bank or the bank you deal with, always look for the lowest interest rate for your real estate financing.
For example, small and not well-known banks usually offer lower interest rates and better offers on real estate financing than large and well-known banks, and small banks do this to attract customers. The difference between paying an annual interest rate of 4.5 percent and 5 percent may mean saving $ 30,000.
3- The difference between fixed and declining interest
First, you should know that the amount of the monthly installment that you pay is a part allocated to repaying the loan itself and a part allocated to paying interest on the loan.
One of the things that everyone who deals with banks should know is “the difference between fixed interest and diminishing interest.” In fixed interest, the amount that you pay to pay the loan interest is equal in all installments, so the amount that you pay to pay the interest on the loan in the first year is fixed until the last year. It does not change, but in the declining interest, the largest part of the interest on the loan is paid at the beginning in the first years, then the amount allocated to the interest that you pay decreases as the years pass. According to the diminishing interest, the bank takes its profit early, and it is known that the bank’s profit is in the interest on the loan.
4- Waiver in case of death and total disability
You must make sure that in the event of death or total disability, the financing value will be forfeited and not claimed, and the property will become the property of the heirs. This happens because the bank or the real estate finance company insures the risks of death or total disability, and I always advise you to make sure that in the event of death or total disability, the debt will fall and the property will become the property of the heirs. else.
5- The difference between leasing financing and Murabaha financing
Financing by leasing means that the bank buys the property and leases it to the customer with a promise that the customer will own the property at the end of the lease period with the payment of the last installment. If the monthly installments decrease, the value of the monthly installments will decrease.
6- The conditions for early payment and early sale, and what are the expenses that you will pay
You must make sure that there is nothing in the text of the contract that prevents the early sale of the property (in some contracts the bank stipulates that there should be no early sale in the first two years).
You must make sure that when defaulting and requesting that the bank sell the property, the bank will not take the remaining term cost (interests), or at least that the bank does not take more than three months according to the decreasing interest, as in Saudi Arabia.
Some banks impose a percentage or fine when paying early or selling the property after a number of years. You must know from the beginning what expenses you will pay when paying early or selling the property.
7-Keep your reputation
Maintain your credit record, pay all installments on time, and abide by any agreement you conclude with the bank, because if you do not comply, you will be on the black list and no bank will lend you again. Please protect your reputation.
8- Fees and expenses
You should know from the outset that you will pay real estate financing approval fees. In Saudi Arabia, the Saudi Arabian Monetary Agency set it at a rate of no more than 1% of the real estate financing value, with a maximum of 5,000 Saudi riyals, whichever is less.
You should know that you will pay other expenses, such as real estate registration fees, real estate appraiser fees, or …etc, depending on the country in which you live. Therefore, you must ask from the beginning about these expenses and how much they will cost you, and you should ask a clear question at the end.
