REGA Real Estate Finance

Question 1

What is the maximum loan-to-value (LTV) ratio for residential mortgages in Saudi Arabia as set by SAMA?

Accepted Answer

90%

Answer

SAMA has set the maximum LTV ratio at 90% for first-time home buyers' first property, meaning buyers must provide at least a 10% down payment. For subsequent properties, the maximum LTV is lower.

Question 2

What is the difference between a conventional mortgage and an Islamic mortgage (Murabaha) in Saudi Arabia?

Accepted Answer

Murabaha involves the bank buying the property and reselling it to the buyer at a markup, avoiding interest (riba)

Answer

In a Murabaha mortgage, the bank purchases the property and sells it to the buyer at a disclosed markup paid in installments. This structure avoids interest (riba), which is prohibited in Islamic finance, while achieving a similar economic result.

Question 3

What is an Ijara mortgage used in Saudi real estate financing?

Accepted Answer

A lease-to-own arrangement where the bank owns the property and leases it to the buyer until full payment

Answer

In an Ijara mortgage, the bank buys the property and leases it to the customer for an agreed period. The customer pays rent (which includes a profit margin for the bank) and gradually acquires ownership. Title transfers upon final payment.

Question 4

What is the role of the Saudi Real Estate Refinance Company (SRC)?

Accepted Answer

Purchasing mortgages from primary lenders to increase liquidity in the housing finance market

Answer

SRC, a PIF-owned company, operates as a secondary mortgage market institution. It purchases mortgage portfolios from banks and finance companies, enabling them to originate more loans and increasing overall housing finance availability.

Question 5

What protections does Saudi mortgage law provide to borrowers if they default?

Accepted Answer

The lender must follow legal foreclosure procedures, provide notice periods, and cannot seize the property without court authorization

Answer

Saudi mortgage law requires lenders to follow formal foreclosure procedures including proper notice to the borrower, opportunity to cure the default, and court-authorized enforcement. Borrowers have legal protections against arbitrary property seizure.

REGA Practice Test

REGA Practice Test

REGA Real Estate Finance