Posted by: islamicfinancingnews | May 13, 2012

Flexibility Can Benefit Islamic Mortgages

Understanding the different choices Islamic finance offers includes recognizing the importance of flexibility for both conventional and Islamic mortgages.

Sometimes a growing family means you have to sell your house and move to a larger one, or a job relocates you to a new city. When a change in circumstances occurs, it may be possible to transfer or port the balance owing on your existing mortgage to a new property without paying a penalty fee, provided the loan-to-value ratio (the amount of the mortgage loan compared to the property’s value) is the same or lower than the present property and the terms of the mortgage remain the same.

Mortgage insurance is required when a mortgage equals more than eighty percent of the home’s value and an appraisal will be needed on the new property to ensure the loan-to-value ratio is met. In the event the new property costs more, the extra value would be secured at the current interest rate.

Although you will be responsible for the appraisal fee and associated administrative charges, porting your mortgage can be beneficial by allowing you to keep your existing interest rate and avoid the time and costs associated with obtaining a new mortgage at a potentially higher rate, and the penalty fee banks charge to allow you to get out of your mortgage before the end of the term.

Talk to your lender about portability features and other options available to you with Islamic mortgages.

 

 

 

 

 

 

 

 


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