Posted by: islamicfinancingnews | September 29, 2012

Make an informed decision when it comes to Islamic mortgages

Understanding Islamic finance options that are best for you includes a basic knowledge of the fundamentals both Islamic mortgages and conventional mortgages share, and that includes the decision on whether to opt for either a fixed or variable mortgage rate.

A fixed rate means the mortgage interest rate and payments are fixed for the term of the mortgage. In the latter case, a variable rate will fluctuate with changes in the prime lending rate adjusted by the Bank of Canada meaning when interest rates are low, you’ll save more on the interest portion of your payments over the term of your mortgage. On the other hand, a spike in the prime rate means interest payments will increase proportionately.

It should be noted that fixed rate mortgages are the more popular choice among borrowers in general and younger people in particular, many of whom must adhere to a strict budget in order to afford their first home. Although you probably won’t save as much on interest, the fixed rate mortgage offers a stability that comes from knowing your monthly mortgage budget is unaffected by rising or falling market interest rates.

Talk to your lender for advice on making the right choice when it comes to Islamic mortgages free from Riba and the loan terms that best suit you.

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