Posted by: islamicfinancingnews | May 30, 2012

Islamic mortgages present an alternative finance option

While Islamic mortgages are most common in the UK, their popularity in North America has increased over the last several years. In order to understand Sharia compliant financial products, it’s important to understand some of the different finance options available.

For example, an Ijara is a lease-to-own Home Purchase Plan (HPP) in which the lending institution purchases the property you want and leases it back to you while you pay down principal through installments and gain equity. Islamic finance providers assess whether you can afford the loan in the same way as you would qualify for a conventional mortgage and a portion of each payment goes toward ownership until the customer owns the property outright at the end of the term.

While this method offers customers the same protection they would have with a conventional mortgage, the main difference is that when an Islamic bank owns the property as an asset, money is made through profit or rent rather than payment or receipt of Riba (interest) which is prohibited.

Muslims in the United States and Canada want to benefit from what Islamic finance has to offer and remain in accordance with all aspects of Sharia law and that includes the alternative financing option that Islamic mortgages can provide.

 

 

 


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