Posted by: islamicfinancingnews | December 19, 2012

Consider your needs when applying for Islamic mortgages

islam-11 Practicing Muslims are interested in learning about Sharia compliant financing programs free from Riba that can include proper Islamic mortgages.

Lately, television commercials have been focusing attention on the idea of reverse mortgages. Generally, a reverse mortgage uses the equity in the home to provide a loan to mortgage free, senior homeowners based on a percentage of the property’s fair market value. The homeowner can receive monthly income payments, a credit line, or a lump sum payment. What sets this financing option apart from a more traditional type of mortgage is the absence of monthly payments due on the loan. In the case of a reverse mortgage, interest on the loan can accumulate until the property is sold, or you no longer occupy the property as your principal address, or the registered owner dies, at which time the outstanding loan balance plus interest becomes due in full.

While this type of cash flow appeals to many seniors and retirees, it’s important to remember that the borrower is responsible for the administrative costs involved including the title search and registration, title insurance and legal fees, in addition to the fee for a property appraisal. Due to the typically high interest rates associated with reverse mortgages, experts suggest this alternative should only be considered for short-term financing and selling the home is the better option to fund your retirement.

It’s best to consult your lender so you can make an informed decision when it comes to the best Islamic finance options available to suit your individual needs.

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