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Muslim faith based mortgage

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 Halal mortgage, which will classify the Mortgage as Halal 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 Halal mortgage is very customized, it is important to ask the following questions.

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

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

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 the following questions, If I lose my job and want to get rid of my House and mortgage, then what is the policy?



Muslim faith based mortgage


SOURCE OF MONEY

For Halal mortgages, the source of money is an important

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


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 then

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

  2. 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,

  1. What are the policy for making accelerating and additional payments together?

  2. If there is a monthly rental payment as a part of the mortgage agreement, what is the policy for accelerating and adding payments on top of the rental payment?

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

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


HISTORY OF REFERENCES

The Halal mortgage concept is new, and many institutions recently entered the market. Ask following questions

  1. How long have you been established?

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

  3. Can I get references from your customers?



BOTTOM LINES

Before making a decision, the Bottom lines are that the person making a decision should consider a 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, everyone leaves except him, stays in the grave, and is answerable to Allah (SWT). The minimum 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 decide.


Reference

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

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