The roots of Jewish lending are found in tzedakah, in charitable works. Loans were to be given as a form of charity, not for gain. Jews were specifically prohibited from lending to other Jews “on interest.” The poor were not to be condemned for an inability to repay a loan. Loans could consist not only of money but also of goods and utensils. There were ethical considerations underlying those strictures. Such a loan was considered a form of tzedakah, indeed, one of the highest forms because, as Maimonides points out in his Mishneh Torah, “a person who assists the poor man by providing him with…a loan [is] placing him in a situation where he can dispense with other people’s aid.” All Jews must give such free loans, regardless of gender or class. Even those whose livelihood comes from lending must make free loans to the poor.
MORTGAGE CONDITIONS & FORECLOSURE POLICY
Conditions are important in the concept of a faith-based mortgage, which will classify the Mortgage to be faith-based or not. In the conventional bank, if foreclosure happens, the house is taken away by the bank, and the payment you paid is gone. Since the mutual mortgage is very customized, it is important to ask the following questions.
What are the mortgage conditions?
Would it be the same as a conventional mortgage?
What is the policy of mutual mortgage for foreclosure in an unfortunate event?
INTERIM MEASURES
If a person loses his or her job and there is no way to pay the mortgage, then ask the Mortgage provider to address questions such as, If I lose my job and want to get rid of the House and mortgage, What is the policy?
WHAT MATTERS
It matters to know the net amount coming out of pocket. If the total mortgage amount is $610K, then the interest I would be paying is $400K approximately with the conventional bank.
How much is the total mortgage amount, including fees and interests?
What will be the interest rate?
INTEREST SAVINGS VS RENTAL SAVINGS
Most conventional banks are allowed to make accelerated bi-weekly and additional yearly payments, saving 5-55% interest. So for the mortgage amount of 610K, the potential interest savings is $280K, approximately at a 3.69% interest rate. About this,
What are the policy for making accelerating and additional payments together?
If there is a monthly rental payment as a part of the mortgage agreement, what is the policy for accelerating and additional payments on top of rental payment?
How much minimum down payment or deposit is required?
How much maximum additional payment is allowed per year?
HISTORY AND REFERENCES
The Faith-based mortgage concept is new, and many institutions recently entered the market. Ask following questions
How long have you been established?
How many mortgage owners as of today do you have with mortgage plans?
Can I get references from your customers?
BEFORE MAKING DECISION
The bottom lines are that the person making a decision should consider a few precautionary measures. If I am buying something, then it is my due diligence that I make the informed and subjective decision-based. Review personal necessity vs. nice to have it; review market conditions, Your job situation and household income, and your opinion on household people, and buy what is needed. If my family can stay in a small property, then I do not need to buy a big one, Review and assess, rent vs. owning, and many more things…
REFERENCES
Disclaimer: This information intended for reference only. Please contact respective mortgage operator for more detailed information.