Posted by: islamicfinancingnews | December 8, 2012

Consider Sharia Compliant Islamic Loans

islam41 When you are considering applying for Islamic loans to help finance a home purchase, it helps to be aware of the differences between the two most popular types of home loans in order to decide which is best for you.

A fixed rate loan is characterized by the term “fixed” in that these loans have a fixed interest rate over a specific period of time, usually between fifteen to thirty years. Knowing the amount of your principal and interest payment each month will not change for the duration of the loan is the steady course many homebuyers prefer, particularly first time buyers and those nearing retirement age that want to follow a budget plan.

On the other hand, a variable rate loan means the interest rate can vary at different times during the duration of the loan. Here, the rate fluctuates with the prime rate set by the Bank of Canada, which currently is at historically low levels, plus the rate added on by a conventional financial institution. A low variable rate can significantly affect the amount of principal paid off with each payment, however a higher interest rate can also lead to a higher mortgage payment. This type of loan is sometimes preferred by people who plan on living in their current home for less than five years or anticipate an increase in earnings or income in the next few years.

Consult with your Islamic finance lender for advice on the best type of Sharia compliant Islamic loans that suit your individual requirements.

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