The Total Cost of a Facility: A Worked Example Beyond the Monthly Payment

Two offers with similar monthly payments can differ substantially in what you repay. A calculation that makes the difference visible.

Facilities are compared on the monthly payment because it is the figure that affects daily life. It is also the figure most easily reduced by extending the term, which raises the total. The calculation below compares offers on what is actually repaid.

The situation

A borrower is comparing two illustrative offers for the same amount. One has a lower monthly payment over a longer term, the other a higher payment over a shorter one.

Assumptions (illustrative)

• Amount required: SAR 400,000.
• Offer A: assumed monthly payment SAR 3,900 over 15 years.
• Offer B: assumed monthly payment SAR 5,100 over 10 years.
• Assumed arrangement and processing costs, Offer A: SAR 6,000.
• Assumed arrangement and processing costs, Offer B: SAR 4,500.
• All figures are illustrative assumptions used to demonstrate the method.

Step 1: Total payments under Offer A

SAR 3,900 multiplied by 180 months equals SAR 702,000.

The comfortable monthly figure accumulates across fifteen years into a total far above the amount borrowed.

Step 2: Total payments under Offer B

SAR 5,100 multiplied by 120 months equals SAR 612,000.

A higher monthly commitment, and SAR 90,000 less repaid overall on these assumptions.

Step 3: Adding costs

Offer A totals SAR 708,000 and Offer B totals SAR 616,500 once arrangement costs are included.

Fees are one-off and therefore matter less than the term, but they belong in the comparison.

Step 4: Cost of the money

Offer A costs SAR 308,000 above the amount borrowed; Offer B costs SAR 216,500.

This is the price of the liquidity. Expressed this way, the difference between the two offers is easier to weigh than a difference of SAR 1,200 per month.

Step 5: The affordability question

The difference in monthly commitment is SAR 1,200, which must be serviceable every month for ten years.

The shorter term is cheaper only if it is genuinely affordable. A shorter term that forces refinancing later is not a saving.

Step 6: The middle option

A 12 year term would sit between the two, reducing total cost against Offer A while keeping the monthly commitment below Offer B.

Term is usually negotiable, and the useful question is the shortest term you can service comfortably rather than the lowest payment available.

What changes the answer

• If the rate is variable, the totals above change with it, and the longer term carries that exposure for longer.
• Early settlement changes the totals substantially, which is why settlement terms matter before signing.
• Additional costs such as required insurance should be added to both sides of the comparison.
• A lower monthly commitment may be worth its cost if it preserves liquidity for other purposes.

What the numbers tell you

• Compare offers on total repaid and on the cost above the amount borrowed, not on the monthly payment.
• Treat term as the main lever, since it moves the total more than small rate differences.
• Choose the shortest term you can service under a stress case rather than under normal conditions.
• Include fees and any required insurance in the comparison so the offers are measured the same way.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

If you are weighing a financing decision, Domira can review the offers, model the total cost and stress test the obligation with you before you sign anything.