The dream of owning a home for life is a goal for everyone who seeks to provide comfort and stability for their family by securing decent, suitable housing that will also serve as their future refuge, God willing. However, many of us are at a loss when trying to achieve that dream and decide on the best course of action. Buying a home requires a large sum of money, so it is essential to answer an important question: Should the home be purchased with cash (if available), or should one turn to banks and mortgage companies?
To answer this question, there are many advantages to each option that must be taken into consideration. The focus here is on the price of residential property and how to finance it.
The Financial Situation of the Prospective Buyer
The prospective buyer’s financial situation determines which options are best when deciding whether to purchase with cash or pursue financing solutions. Those with the necessary liquidity will be able to purchase as soon as a suitable property becomes available at a price that fits their financial means, whereas those seeking financing will need to determine the financing amount, the appropriate profit margin, and the availability of a down payment. Here, financing programs supported by the Real Estate Fund and the Ministry of Housing play a crucial role incitizens to purchase property; these programs cover up to 100% of the financing cost (for subsidized amounts of 500,000 riyals or less), in addition to an exemption from real estate transaction tax for amounts of one million riyals or less for a first home.
Advantages of Buying with Cash
1- Perhaps one of the most important advantages is the freedom of choice without being bound by financing conditions and the like, which is a significant and influential benefit.
2- Effective investment: Purchasing a property (home)—even if intended for residential purposes—is simultaneously an investment, as real estate prices are relatively stable and many properties appreciate in value over time.
3- Cash generally loses its value over time; therefore, converting it into a fixed asset helps preserve that value.
4- Freedom to dispose of the property in the future (real estate ownership), meaning having complete freedom to make any decision—such as selling, adding to, or modifying the property—which is an important consideration for the future.
5- Quick acquisition of the home, since paying in cash allows the transaction to be completed in one or two days at most.
*Specialist in real estate financing and performance.
