Amendment of Paragraph 3 of the Mandatory Instructions When Offering Real Estate Finance Products for Individuals

Instructions When Offering Real Estate Finance Products for Individuals No:
465440000099
Date(g):
16/5/2018
|
Date(h):
2/9/1439
Status:
In-Force
Translated Document
These instructions were issued under
Circular No. (46544/99), dated 2/9/1439H, corresponding to 16/05/2018G , and were amended under Circular No. (41059668), dated 16/10/1441H, corresponding to 07/06/2020G . First: Introduction A. Objective These instructions aim to establish the minimum provisions that finance providers must adhere to when offering real estate financing products to individuals, in order to help clients make informed decisions when requesting real estate financing, protect the rights of all parties, and enhance the soundness of the real estate financing sector. B. Scope These instructions apply to banks and real estate finance companies subject to the supervision of SAMA. Second: Instructions for Offering Real Estate Financing Products to Individuals When offering real estate finance products to individuals, banks and real estate finance companies must comply with the following:

When a client submits a request for one of the real estate finance products, the finance provider must request and study the necessary information to understand the client's financial circumstances and form a clear picture of the client's ability to meet the obligations arising from the requested financing. The provider must ensure that the product is suitable for the client. A real estate financing offer should not be made if the results of the client's ability to meet obligations do not align with the provider's approved credit-granting policies.

The provider must explain the proposed real estate finance product to the client, clarifying the terms and conditions of the financing contract, especially the risks associated with the product. This explanation must be given by a qualified and responsible employee and discussed with the client in a language the client understands, in a simple and clear manner. The provider must document this explanation and may not offer a real estate financing product unless it is clear that the client understands the terms, conditions, and associated risks.

The provider must offer the client a real estate financing offer that is valid for no less than fifteen working days from the date it is presented. The offer can be provided to the client in written or electronic form, according to the client's preference. The offer must include all relevant data and documents in the same format as would be signed if the real estate financing contract were executed. The offer must include the following documents:

a-
The real estate financing contract and its attachments.

b-
The disclosure form for the real estate financing offer in the format provided in
Annex A
.

c-
The acknowledgment form for accepting the credit risk associated with variable-rate real estate financing, in the format provided in
Annex B
(for variable-cost financing products).

The provider must document the client's receipt of these documents, whether provided in written or electronic form, and ensure that if the client opts for a written offer, they can take the documents off the premises. The client is free to consult others for advice. No real estate financing contract may be signed unless these documents have been provided to the client, and the client is allowed to take them off the premises.

Before the offer expires, the provider must assign a qualified credit advisor who is well-versed in real estate finance products for individuals. The advisor must provide the client with a clear explanation of the nature of the proposed financing, its risks, the terms and conditions of the contract, and the repricing mechanism (if applicable). The advisor must also answer the client's inquiries transparently and clearly. The credit advisor must not be the same employee who interacted with the client before the offer or presented the offer. Documenting communication with the credit advisor is a key requirement for finalizing the contract, and this can be done through audio recordings or by signing a meeting confirmation form. No real estate financing contract may be signed unless the credit advisor has provided the required explanation to the client, answered all inquiries, and documented it.

There must be a waiting period of at least five working days from the date the client receives the real estate financing offer, allowing the client time to review the offer, consult with the credit advisor, and seek external advice. The provider must encourage the client not to make any decisions regarding the property during this five-day waiting period, such as making a down payment or deposit. No real estate financing contract may be signed before the waiting period ends.

Banks and real estate finance companies are prohibited from signing any real estate financing contracts for individuals unless all the above requirements have been met and documented in the financing file.

Third: Annexes
Annex A
[Financing Entity Logo]
Real Estate Financing Offer Disclosure Form for Individuals Client Information Client Name

Offer Submission Date

National ID or Resident ID

Offer Expiry Date

Mobile Number

Reference Number (File Number)

Total Monthly Income
......... (SAR)
Net Available Monthly Income
....... (SAR)
Total Debt-to-Income Ratio (Before Financing)
....... (%)
Total Debt-to-Income Ratio (With Financing)
....... (%)
Financing Information
Financing Amount
......... (SAR)
Financing Type (Ijarah / Murabaha / Istisna / ...Other) …………….
‎(+) Profit Amount
......... (SAR)
Annual Percentage Rate (APR)
....... (%)
Property Evaluation Fee
......... (SAR)
Down Payment Amount
......... (SAR)
Insurance*
......... (SAR)
Contract Term
..... (Month)
Any Other Fees or Costs*
......... (SAR)
Number of Installments
...... (Installment)
Administrative Fees
......... (SAR)
Monthly Payment Amount (Installment/Rent)
......... (SAR)
(=) Total Amount Payable
......... (SAR)
Type of Profit Rate (Fixed/Variable)
…………….
Variable Profit Rate* :.....(%)
Fixed Portion: ..... (%)
Variable Portion:..... (%)
Fixed Profit Rate*
....... (%)
Minimum Monthly Payment Amount Throughout the Contract Term* ......... (SAR) First Period Duration* ..... (Month) Maximum Monthly Payment Amount Throughout the Contract Term* ......... (SAR) Date of First Recalculation of Contract Value/Payments*

"Client's Signature Acknowledging Understanding of the Difference Between Fixed and Variable Profit Rates" Final Installment Amount* ......... (SAR)

Additional Notes
…………….
Key Property Details
Property Type (Apartment / Villa / Land...)

Property Value

City

Neighborhood

Title Deed Number

Title Deed Issue Date

Title Deed Issuing Authority

Property Number

Land Area

Building Area*

Property Readiness for Occupancy*

Number of Rooms*

Property Age

Developer's Warranty Period*

Note
: Reviewing this form does not replace reading the entire contents of the financing contract and its attachments, and does not exempt from the obligations stated therein.

Client's signature acknowledging receipt and confirming that the credit advisor answered all of their questions (Signature is not required to approve the financing contract) Signature and seal of the Authorized Person of the Financing Authority (Signature is required for financing according to the above data unless misleading information is found or there is a change in the client's circumstances) *The phrase (not applicable) should be inserted if the relevant clause does not apply to the financing contract. (Financing entity information and contact details)
Annex B
Acknowledgment of Acceptance of Credit Risks for Real Estate Financing with Variable Term Costs

I, [Client’s Full Name Written by Hand], acknowledge that I have applied to [Lender’s Name Printed] (the Lender) for real estate financing in the form of [Real Estate Financing Type], and that the Lender has provided me with a comprehensive explanation of [Real Estate Financing Type], including the terms and conditions of this financing contract, the risks associated with [Real Estate Financing Type], and has answered all my inquiries, specifically:

The Lender explained that the term cost associated with [Real Estate Financing Type] is variable, which means it may increase or decrease during the contract period. The agreed-upon installment may rise or fall, and the Lender provided examples showing that the installment amount could significantly increase (e.g., the agreed installment in the contract: 3500 SAR, could become 5500 SAR or 7500 SAR). The Lender explained the mechanism for recalculating the term cost concerning the reference rate and the dates for recalculating the term cost.

I reviewed a disclosure form for the real estate financing offer detailing the term cost associated with [Real Estate Financing Type], the minimum monthly installment amount throughout the contract duration, and the maximum possible monthly installment amount.

The Lender provided me with the real estate financing offer, which included clear copies containing all data from the real estate financing contract, its attachments, the disclosure form for the real estate financing offer, and this acknowledgment form. I took these documents to review them outside the Lender’s premises and to present them to anyone I choose for opinion and advice. The offer’s validity was not less than fifteen business days.

The Lender provided me with a credit advisor who contacted me and provided a [telephone/face-to-face] comprehensive explanation of [Real Estate Financing Type], including the terms and conditions of this financing contract, the risks associated with [Real Estate Financing Type], and answered all my inquiries.

After reviewing all details of the real estate financing offer and understanding them clearly, and after studying all my obligations and considering all future possibilities and the related burdens and commitments not previously undertaken before signing the contract, I hereby, of my own free will, accept the obligations arising from this type of real estate financing upon signing the contract and all its attachments.