The method of real estate financing depends on the type of financing, and there are two types of financing that banks and companies deal with in Saudi Arabia, the most popular of which are the profit system and the leasing system. It varies according to the customer’s desire and according to his compliance with the conditions of each type, as follows:
Murabaha formula: The finance company or the bank buys the property and then sells it to the customer, and the customer pays part of its price as a down payment, and the rest of the amount is paid in advanced payments throughout the financing period, and the interest rate is fixed, which is called mortgage financing.
The finance company or the bank buys the property and then leases it to the customer with the promise of ownership at the end of the financing period, and the client pays an advance rental payment and the rest of the payments during the financing period. The interest rate in this type is variable according to the market index annually, in which the customer pays his loan in installments that change in value according to the prevailing interest rate up and down. Therefore, it is difficult to determine the lowest profit rate for real estate finance.