Posted by: islamicfinancingnews | August 6, 2012

Paying Down The Principal On Islamic Mortgages

Recently, the federal government introduced changes tightening lending rules including the size of mortgages by dropping the maximum amortization rate from 30 to 25 years. Whether you are applying for Islamic mortgages or one of the more conventional types, the amortization rate is applicable with these new rules aimed at lowering personal debt levels, slowing the housing market and helping homeowners pay off mortgages faster.

A recent study conducted by BMO indicates that many Canadians are paying off their mortgages within fifteen years, with additional data highlighting over twenty percent of homeowners are quickening their payment schedules by making lump sum payments or increasing the minimum amounts they are allowed to make on their monthly mortgage payments.

There are ways you can help pay down the principal during the term of your mortgage loan. For example, making even a small extra principal payment each month can take years off the length of your mortgage. Similarly, experts suggest using an annual tax refund or some other financial bonus towards making a lump sum payment on your mortgage each year if possible.

If paying off your mortgage early is one of your financial goals, talk to your lender to make sure that you have the right Islamic loans behind you that avoid Riba and offer the best terms including a prepayment plan that allows you to make extra payments without penalty.

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