Muslim faith based mortgage

Updated: Mar 27

Economic challenges are becoming part of our daily life and for Muslims to own property is another bigger road to cross. Following questions should be addressed by Hallal Mortgage company.


MORTGAGE CONDITIONS & FORECLOSURE POLICY


Conditions are important in the concept of Halal mortgage which will classify the Mortgage to be Halal or not. In the conventional bank, if foreclosure happens then house is taken away by bank, and the payment you paid is gone. Since, Halal mortgage is very customized, it is important to ask following questions

  1. What are the mortgage conditions? Would be same as a conventional mortgage?

  2. What is the policy of Halal mortgage for foreclosure in an unfortunate events?

INTERIM MEASURES


If person loses his or her job and there is no way to pay the mortgage then ask Mortgage provider to address following questions, If I loses job and want to get rid of House and mortgage then what is the policy?



Muslim faith based mortgage


SOURCE OF MONEY


For Halal mortgages, source of money is an important

What is the source of money, i.e., coming from Halal sources or through another conventional bank?

WHAT MATTERS


It matters to know about what the net amount will be coming out from pocket. If the total mortgage amount is $610K then the interest I would be paying $400K approximately with the conventional bank then

  1. How much total mortgage amount including fees and interests?

  2. What will be the interest rate?

INTEREST SAVINGS Vs. RENTAL SAVINGS


The most conventional bank has the allowance for making accelerated bi-weekly and additional yearly payments which can save 5-55% interest. So for the mortgage amount of 610K, the potential interest savings is $280K approximately at 3.69% interest rate. About this,

  1. What is the policy for making accelerating and additional payment together?

  2. If there is rental monthly payment as a part of mortgage agreement then what is the policy for making accelerating and additional payment on the top of rental payment?

  3. How much minimum down payment or deposit is required?

  4. How much maximum of additional payment allowed per year?

HISTORY OF REFERENCES


The Halal mortgage concept is new, and recently, there are many institutions came into the market. Ask following questions

  1. How long have you been established?

  2. How many mortgage owners as of today do you have with Halal mortgage plan?

  3. Can I get references from your customers?



BOTTOM LINES


Before making decision, Bottom lines are for the person who is making a decision should consider few precautionary measures.


Prophet Muhammad (PBUH) did caution ummah on interest and taking interest is prohibited in Islam through Holy Quran and Sunnah.


After a person dies, then everyone leaves except him stays in the grave and answerable to Allah (SWT).


The minimum what we can do is due diligence by making informed and objective decisions. Review personal necessity vs. nice to have, look at renting vs. owning options, examine market conditions, assess job situation and household income, Obtain opinions of household people and If a family can stay in the small property, then avoid purchasing the big property. Review our financial tools "Before debt management" and Blogs on Decision making, thinking & Psychology which may help you on deciding.


Reference

  1. When faith and finances collide - Judaism, Christianity and Islam

Disclaimer: This information intended for reference only. Please contact respective mortgage operator for more detailed information.

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