Mortgage

A mortgage is a loan taken to buy property, with the property itself held as security. The borrower makes regular installments of principal and interest over a fixed term, typically 15 to 30 years. If the borrower stops paying, the lender can seize and sell the property to recover what is owed.

In the Gulf, most home finance is structured as ijara (where the bank owns the property and you pay rent with an eventual transfer) or murabaha (where the bank buys the property and sells it to you at a markup). In both cases the bank holds the property during the loan term, not just a claim against it. The real risk for a borrower is not the structure but the currency. If your mortgage is priced in dollars and your salary is not, a fall in your own currency raises what the payment costs you in the money you actually earn. The installment never changes. What it takes out of your month does, and you can be paying it on time the whole way.

• The installment covers both principal (what you borrowed) and interest (what the lender charges). Early payments are mostly interest; later ones mostly principal.
• In ijara and murabaha structures, you do not own the property until the final payment. The bank's ownership is what secures the loan.
• Property taxes, insuranceTermInsurance×التأمينA contract where you pay a regular fee to transfer the financial risk of a specific event to a company that agrees to cover the cost if it happens.Open the term and maintenance are your responsibility, not the lender's, even though the bank holds the title.
• The total cost of a mortgage is far more than the purchase price. A 20-year loan at 5% costs roughly 60% more than the property itself.