Islamic MortgageMortgage of Islam
When you wonder why a mortgage must be created on the basis of someone's religious beliefs, consider the following. According to the Sharia Act of Islam, the paying or receiving of raiba (also known as interest) is forbidden, and so a traditional mortgage that calculates interest every months cannot be used by a practising Muslim.
Obviously, this is a possible issue as house values are usually far too high to allow a would-be home purchaser to buy directly with money. This can be resolved, however, by the fact that the real estate is bought by the real estate company and sold back to the mortgage debtor (borrower) in one of three ways.
Either the House will be sold by the House at a higher rate to the Mortgagor on an instalment basis, or the House will be let to the Tenant/House Owner and each monthly a premium will be payable on the Home's main credit until it is fully used. As a rule, the rental rate is determined by searching for similar houses in the area in which the real estate in question is situated.
It is also known as "Lease to Purchase" because the owner "rents" the real estate while at the same time he pays the capital and gains capital. As soon as a significant part of the price has been payed, you can buy the entire house with money. One last alternative is to set up an LLC in which the financing entity and the homeowner own stakes in the real estate.
Concerning the West, Islamic mortgage loans are probably the most frequent in the United Kingdom, although they also seem to be gathering momentum in the United States. During the early 2000s, mortgage lender Freddie Mac consented to buy this type of "mortgage", and at this point others probably wished they had.
Since Islamic mortgage rates tended to be simpler than some of the extravagant offers seen on conventional Alt-A and sub-prime credit, the homeowners failure rates are likely to be much lower. Mae Fannie is also an investors in this type of loan, which she calls'interest-free financing', and instead of a mortgage they become an investors in the real estate itself.
As a result, smaller bankers and mortgage houses are able to quote the options and then resell them to Fannie or Freddie so that they have the resources to grant new credit to prospective clients. Failure to use tricks and lures and switches has led more Muslims to consider an Islamic mortgage as it further warrants the election.
Quicken recently had to make a move on Quicken Credits because the firm is allegedly mostly Jewish. Rather than considering the housing loan granted by the firm as interest, it is now referred to as'co-investment' between the house owner and the creditor. That was a nice big thing (and important fix) considering the speed loan and its rocket mortgage are now the top mortgage lenders in the United States.
Prior to blogging, Colin worked as an advisor to a mortgage financier in Los Angeles. He' been passionate about mortgage lending for 12 years.