Owning a home, residential or commercial real estate is a dream for many people. However, realizing this dream usually requires mortgage financing, which is the process of obtaining a loan from a financial institution to purchase real estate.
Therefore, the relationship between real estate financing and real estate valuation becomes a close relationship as financing requires obtaining a report on the value of the property to be purchased. In the following, we will discuss property finance, the mortgage system, and the Al Rajhi mortgage calculator.
What is real estate finance?
Simply put, real estate financing refers to the process of taking out a loan to buy a property. Financial organizations, such as banks and finance companies, provide these loans to individuals and businesses who wish to buy residential or commercial real estate.
What is real estate valuation?
Real estate valuation is the process of estimating the market value of a property. This is done by analyzing many factors, such as the location, condition, and characteristics of the property, as well as the economic factors surrounding the market, such as boom and bust.
What is the relationship between real estate financing and real estate valuation?
The property valuation process plays a central role in the real estate financing process, as it forms the basis for determining the value of the loan that the borrower can obtain.
How is real estate valuation used in the finance system?
- Determining the loan value:
The financial institution evaluates the property to determine its market value. The maximum loan limit is usually set at a percentage of the appraisal value, such as 80% or 90%.
- Risk assessment:
A real estate valuation helps a financial organization evaluate the risk of lending money to buy a particular property. Properties with low value or structural issues may pose more risk to the lender, affecting the value of the real estate and therefore whether or not the property can be financed.
- Determine the terms of the loan:
The results of a valuation can affect the terms of the loan, such as the length of the loan and the interest rate. Higher-value properties may allow the borrower to obtain better loan terms.
- Ensure the safety of the deal:
A real estate appraisal helps ensure the safety of the real estate financing process by accurately assessing the value of the real estate.
- Protect the lender:
A real estate appraisal protects the financial organization from the risk of lending money to buy low-value or damaged properties.
- Protect the Borrower:
A real estate valuation helps the borrower avoid taking out a loan that is beyond their ability to repay.
- Ensure the borrower gets a fair loan:
A real estate valuation helps ensure that the borrower gets a loan that is fair to the actual value of the property.
Tips for getting an accurate real estate valuation in a finance context:
- Choose an accredited valuer:
Make sure you choose a real estate valuer who is accredited and experienced in valuing properties in your area.
- Provide accurate information about the property:
provide accurate information about the property, such as its location, condition, and features, to the valuer.
- Read the valuation report carefully:
Read the valuation report carefully and understand the valuation methodology and findings.
What are the conditions for real estate financing?
At Al Rajhi Bank, the finance conditions vary from one entity to another, but at Al Rajhi Bank, the conditions and documents are as follows:
- Salary transfer letter to Al Rajhi Bank (in case of salary transfer)
- Copy of the works certificate
- Copy of the owner’s national ID
- A clear copy of the cheque
- Filling out a declaration and personal financial disclosure for the customer
- National Identity Card
- Salary reference from the employer
- Applicant must be of Saudi nationality
- A clear diagram of the property’s location
- At least 18 years of age
- Price quotation for the land
- A minimum of 3 months of service
- A copy of the title deed for both sides.
- Monthly salary starting from SAR 7,000 for salary transfer customers and SAR 10,000 for non-salary transfer customers
- Fill out the ‘Property Finance Application’ form
- View Property Price
Through the bank’s online portal, you can find out the amount of financing using the Al Rajhi mortgage calculator.
Al Rajhi Bank is also one of the most important partners of Aain Real Estate Valuation, the most famous real estate valuation company in Riyadh and many cities in the Kingdom.
In conclusion:
Obtaining a finance loan is one of the most popular ways that enable you to own real estate in a short period in case you do not have the full value of the property at once, and to be able to do so, you need to use a real estate valuation company to facilitate the value of the property you want to own and complete the financing papers.