Posted by: islamicfinancingnews | September 28, 2012

Your Islamic finance lender can answer your questions about Islamic mortgages

When you are looking to finance the purchase of a home, it’s important to understand a few basics that apply to both Islamic mortgages and their more westernized counterparts. In Canada, for example, the minimum down payment amount required for a home purchase is five percent, with the majority of down payments ranging anywhere from five to twenty percent of the purchase price. As of July 9th of this year, new legislation requires a minimum down payment of twenty percent for any home priced over $1 million.

CMHC Insurance, otherwise known as mortgage default insurance, is required on all high risk mortgages being those with less than a twenty percent down payment. This safeguard protects the mortgage lender in case of default by the borrower. The CMHC insurance premium is calculated as a percentage based on the amount of the mortgage. As your down payment increases, the premium amount decreases.

The amount of your down payment will determine not only how much CMHC insurance you will pay, but also the price of a home you can afford, the size of your mortgage and monthly payments.

If you are wondering how long it will take you to save the required funds to purchase a home or to put aside enough money for a down payment, talk to your Islamic finance lender. They have the knowledge to advise you about monies used to provide a down payment, the way CMHC insurance is calculated, and the different types of Islamic loans available for homebuyers.

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