Understanding Islamic finance options that are best for you includes a basic knowledge of Islamic mortgages and even the more traditional reverse mortgages that are becoming popular among seniors and retirees.
Individuals who own property outright and are mortgage free can apply to a bank to qualify for a reverse mortgage which is a loan advanced against the equity in a person’s home. The bank makes a lump sum payment, up to 40% of the property’s appraised value, while interest on the loan accumulates until such time as the property is sold or the registered owner dies and the loan becomes due in full with interest. The main difference between a conventional and reverse mortgage is the lack of monthly payments on the latter type.
While the arrangement may be beneficial for those planning major home renovations or paying off high interest debt or other bills, experts advise reverse mortgages are best in the short-term, no longer than five years, and suggest alternatives that include a home equity line of credit or selling the property for its cash value to help fund retirement years.
Having the right information will help you make better choices about many Islamic finance options available including loans free from Riba.
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