Islamic Home Financing

Islamic finance is a form of banking that adheres to Islam’s principles. Unlike a conventional mortgage, where a lender profits at the expense of borrowers, Islamic banking is designed to protect vulnerable people from exploitation and build healthy communities.

Bank Islam provides a fully Shariah Compliant home financing solution for your next property purchase. We have developed a proprietary model of Diminishing Musharakah called Declining Balance Co-Ownership that shares the risks of home ownership with you and caps fees to save you money.

What is an Islamic mortgage?

An Islamic mortgage is a type of home financing that’s based on Sharia law. This means that it’s halal (permissible under Islamic law) rather than haram (forbidden).

A traditional mortgage works by borrowing money, then repaying it plus interest. But earning or paying interest goes against Sharia law, which is why many Muslims prefer to use a sharia-compliant alternative when buying a home.

There are several types of Islamic home purchase plans that you can choose from, all of which work on the principle of risk-sharing. The buyer either pays rent on a proportion of the property owned by the bank, or the bank buys the property and re-sells it to you at a higher price, and then you pay it back in monthly instalments.

The most popular type of Islamic mortgage is an ijara plan, which is based on the principle of “lease to own”. This means that you don’t have to pay anything towards the purchase of your share in the house, but you make monthly rental repayments until it’s time for you to move into the property.

Another common type of Islamic mortgage is a Murabaha plan, which involves the bank buying a property on your behalf and then re-selling it to you at a higher price. This is commonly used for residential property in the Middle East and Far East, but can also be applied to commercial properties.

If you want to get an Islamic mortgage, you need to be sure that the lender you choose is sharia-compliant. They should be regulated by the Financial Conduct Authority and have received guidance from an authority in Islamic law. commercial mortgage calculator

You may also be required to put down a larger deposit than you would for a regular mortgage. Generally, you’ll need at least 20% of the value of your property.

One way to make sure you get the best deal is to ask a mortgage broker for help. They will know which lenders are sharia-compliant and can advise you on the best options for your specific situation.

You’ll also need to make sure the lender has a good reputation. You can check this by checking their website or visiting the company’s branch to see how they conduct themselves and whether they are a reputable Islamic institution.

How does Guidance Residential’s proprietary model of Islamic home financing work?

Guidance Residential is a US-based Islamic home financing company that began operations in 2002 to provide Shariah compliant, riba-free (free of interest or usury) home financing contracts to Muslim American home buyers. Its proprietary model of Islamic home financing is a form of Diminishing Musharaka called Declining Balance Co-Ownership and has earned the highest rating from The Assembly of Muslim Jurists of America.

The company’s founder, Dr. Mohammad Hammour, led a team of legal experts, Islamic finance scholars, and business leaders to formulate a genuine home ownership model for the Muslim community. After three years of research, Guidance Residential launched a proprietary program that is recognized as an authentic home ownership model in the Islamic financial market.

According to the company’s website, the “Declining Balance Co-Ownership” model is based on the Islamic concept of Diminshing Musharaka and is the preferred approach for most respected Islamic Finance Scholars. In the model, a home buyer and Guidance Residential co-purchase a property together, dividing the purchase price equally and increasing the share of each party’s investment until the home buyer owns 100% of the property.

This model is supervised by an independent Shariah Supervisory Board, which ensures that Guidance Residential’s practices and policies are in line with Islamic law. It is also a member of the Islamic Finance Supervisory Council, a group of leading U.S. Muslims dedicated to the implementation of Islamic financial laws and regulations in the United States.

In 1999, the Office of the Comptroller of the Currency (OCC) approved murabaha-based Islamic home financing products. The OCC took the view that the purchase and sale transactions, which occur simultaneously, constituted a riskless principal transaction.

The OCC approval paved the way for a number of Islamic home financing companies to enter the United States market, some with strong roots in the Middle East. However, many of these products were poorly designed or failed to meet the needs of their customers.

Among these products are Ijara, which is essentially a lease-to-own arrangement; and Murabaha, which is a model in which the financier buys a home from the customer and sells it to them on a deferred basis at an agreed profit. These models have significant drawbacks and are not suitable for most customers.

What are the benefits of Islamic home financing?

Islamic home financing is a way to finance your property purchase without using interest. It can also help you save money. However, it’s important to remember that Islamic finance is not always the best option for everyone.

Some people are hesitant to use Islamic home financing because they believe that it will cost them more in the long run. But this is not true.

The main benefit of an Islamic mortgage is that it can help you avoid the costs of paying interest on your loan. This is because Islam prohibits the interest from being charged on property loans.

Other benefits of an Islamic mortgage include that it can be easier to buy a property. You may also be able to make your repayments more easily.

There are several different types of Islamic home finance available to suit your needs. One option is Murabaha, which enables you to borrow up to 100% of the value of your property.

Another option is Ijara, which allows you to purchase your home in stages. In this case, you will make payments to your lender that are part rent and part capital to finance your final purchase.

This type of home financing is very similar to Diminishing Musharaka, except that your ownership share grows with each payment you make to your provider.

In this scheme, you and your lender will own the property together in a joint ownership agreement. The only difference is that each monthly payment you make will be used to pay off the bank’s share of the property, and your ownership share will increase as their share shrinks over time.

Islamic home financing can also reduce the risk of the lender losing money in the event of the sale of your property. This is because you’ll be responsible for repaying your loan in full before the lender can sell their own shares of the property.

The Islamic home finance market is a rapidly growing industry and has become an increasingly popular choice for many Australians. It can be a great way to build wealth for your future.

How do I apply for Islamic home financing?

Islamic home financing is a unique way to buy your dream property. It’s ethical, transparent and equitable. It’s ideal for Muslims and non-Muslim families who want to make a shrewd investment that aligns with their values.

Islamic mortgages are more complex than conventional ones, so it’s important to get expert financial advice before deciding. You also need legal advice to make sure that your rights are protected.

You’ll find that there are many different types of Islamic home purchase plans, so it’s important to shop around to get the best deal. Some are more popular than others, so it’s important to choose one that suits your needs.

The most common type of Islamic home purchase plan is Diminishing Musharaka (HPP). This is a joint ownership agreement between you and the bank, whereby your share of the monthly repayments decreases as your ownership increases.

There are other types of home purchase plans as well, but these tend to be more complicated. They might be better suited to those who have good credit ratings and a low deposit.

These plans can be a great way to get into the housing market without paying interest, but you should be aware that they can be more expensive than other types of home loans. These costs can include conveyancing fees, general maintenance and Stamp Duty.

In addition to these fees, you’ll have to pay a higher deposit. You’ll need to put down at least 20% of the value of the home.

The majority of Islamic lenders and Shariah compliant providers offer a range of different options. These can vary by country and region, so it’s important to shop around and speak to a financial adviser who can help you find the right product.

Another common option is Ijarah, which is a home purchase plan that involves leasing the property to you from a trust rather than buying it outright. In this case, you’ll put down a deposit and the lender or bank will contribute the rest of the cost.

This is a type of home purchase plan that’s more commonly used in the Middle East and Far East, but it’s also available in the UK. It’s a more flexible type of home loan, but you’ll need to be able to demonstrate that you’re a savvy investor.