The Cash You Need to Close: Every Payment in a Financed Purchase

The equity contribution is the figure buyers plan for and the smallest part of the problem. A full breakdown of the money that has to be available on the day, not borrowed.

Finance covers a proportion of the property value, and everything else has to be cash you already hold. That includes your equity contribution, the transaction tax, the lender’s charges, takaful premiums that fall due before your first instalment, and the costs of making a house habitable. Purchases collapse far more often on cash to close than on the monthly payment, because the monthly payment is the number everybody models.

What this number does and does not include

This breakdown covers money you need available at or before completion on a financed purchase of a completed unit. It excludes the monthly cost of the finance itself and the running cost of owning the property, and it excludes the separate build costs that arise when you are financing construction rather than buying.

Your equity contribution

The share of the purchase you fund yourself. Lenders calculate the amount they will advance against value, typically taking the lower of the agreed price and the accredited valuation, so your contribution is the residual. It is the largest single item and the one most exposed to a valuation that comes in low.

• Pushes it up: A valuation below the agreed price, a property type the lender discounts, or a thinner credit profile.
• Brings it down: A price negotiated below the supported value, and a stronger file that attracts a better advance.
• How to control it: Ask each lender what it will advance on this specific property before you agree a price, and hold a contingency for a valuation gap.

The Real Estate Transaction Tax

A tax applying to the transfer of real estate, published at a headline rate of 5% of the transaction value. Its application, any exemptions and the party who bears it in practice are matters to confirm with ZATCA and with your adviser for your specific transaction, because the detail does not follow the headline.

• Pushes it up: A higher transaction value, and any element of the deal that increases the value on which it is assessed.
• Brings it down: Nothing you can arrange after the fact, which is why it belongs in the budget from the first day.
• How to control it: Confirm the current position and any exemption with ZATCA and a licensed tax adviser before you commit.

Brokerage

The amount payable for the brokerage service on the transaction, governed by the brokerage arrangement you sign. Who pays, and on what event, is a matter of the written agreement rather than of custom, and buyers regularly discover the position only at closing.

• Pushes it up: A higher price, and arrangements that make the amount payable on reservation rather than on completion.
• Brings it down: A clear written agreement, agreed before any viewing, that ties payment to completion.
• How to control it: Read and negotiate the brokerage agreement before you view, not after you have fallen for a property.

Lender arrangement and processing charges

The amount the lender charges for assessing and setting up the facility, usually payable at or around signing rather than spread over the term. It therefore sits in your cash-to-close budget rather than in your monthly cost.

• Pushes it up: A larger facility, a complex structure, or a file that has to be reassessed after a change.
• Brings it down: A clean application first time, and negotiating the charge as part of the overall package.
• How to control it: Get every charge itemised in writing on the offer and compare lenders on the full list.

Valuation and any reinspection

The cost of the accredited valuation the lender requires, and of any reinspection or second report needed because the first figure was disputed or the property changed. It is usually borne by the buyer and paid before the decision is made.

• Pushes it up: An unusual or large property, a disputed figure, or a long transaction that outlives the report.
• Brings it down: A standard unit with good comparable evidence, and a transfer completed inside the report’s useful life.
• How to control it: Ask how long the report will be relied on, and sequence the transfer to finish inside that window.

Takaful premiums due before the first instalment

Cover over the property, and often protection cover that settles the obligation on death or permanent disability, is normally a condition of drawdown. The first premium commonly falls due at or before completion, in the same month as everything else.

• Pushes it up: A higher sum insured, an older building, a commercial element, and age or health factors on protection cover.
• Brings it down: An accurately rather than generously stated sum insured, and comparing providers where permitted.
• How to control it: Ask what cover is required, what it will cost and when the first premium is payable, before you fix your budget.

Registration and transfer administration

The steps that move the title and register the lender’s security each carry their own costs and administration, as does any authority or representation document you need where a party cannot attend. Individually small, collectively a real number on the day.

• Pushes it up: Multiple titles, a subdivision, overseas documents needing attestation, or a party acting through a representative.
• Brings it down: A single clean title, all parties available, and documents prepared well in advance.
• How to control it: Ask for the complete list of registration steps and their costs at offer stage, including the later discharge.

Making the property usable

Utility connections or transfers, any outstanding service charge, immediate repairs identified before completion, and the minimum furnishing needed to occupy. Not part of the purchase, but money that leaves in the same weeks and is routinely left out of the plan.

• Pushes it up: An older unit, a property left vacant, and a handover that reveals work the viewing did not.
• Brings it down: A condition inspection before completion, so the work is priced and negotiated rather than discovered.
• How to control it: Inspect and price this work before completion and keep it in a separate line of your budget.

Costs that never appear on the first page

• The gap created by a valuation below the agreed price, which lands entirely in your contribution.
• A second valuation after a dispute or a delay, paid for by the buyer in most cases.
• Attestation, translation and authority documents where a party, an employer or a document sits outside the Kingdom.
• Service charges or municipal obligations that must be cleared before a drawdown is released.
• The cost of an expired offer, which can mean repeating documents and sometimes the valuation.
• Holding your contribution in cash through a long process, when that money had another use.

Keeping the budget honest

Set your cash-to-close budget before you look at property, and hold a contingency inside it specifically for a valuation gap, because that is the single most likely reason the figure moves. Then decide the reserve you will not spend under any circumstances, and treat a purchase that breaches it as a purchase you cannot afford, however attractive the property. Every amount in this area is set by lenders, authorities and suppliers and changes over time, so confirm each one at the time you transact.

• Before viewing, with the equity contribution and the transaction tax estimated at your target price.
• At offer stage, with every lender charge itemised in writing.
• After the valuation, when the contribution may have moved and the contingency may be needed.
• Before signing, with takaful, registration and habitability costs confirmed rather than assumed.
• At completion, reconciling what actually left your account against the budget you set.

Domira works alongside the finance side of a property purchase or a build: the valuation evidence, the cost plan and the construction programme that a lender needs to see. The lending terms come from your bank or finance company, and Domira makes sure the property side of the file stands up.