Posted by: islamicfinancingnews | June 1, 2013

Islamic finance and reverse mortgages: Here’s what you need to know

islam-81 As long as the mortgage industry has been around, there have always been new innovations developed to serve people better like Islamic finance itself. The reverse mortgage is one of these products that actually allows people to draw on the equity they have in their homes. One of the more attractive aspects of this mortgage product is the fact that borrowers don’t need to pay any of the money back until they sell their property.

Generally there are three different ways to draw on this product that can work in tandem with Islamic loans.

  • The line of credit is the most recognizable. This is the method that allows you to draw on an established amount when you need it. The advantage here is that you can draw on only the amount you need when you need it.
  • The lump sum. Remember that the interest payments are generally the highest here.
  • Monthly payments. Perhaps the lesser known of the options, this allows you to get a predetermined amount and budget accordingly.

It’s important to keep in mind that Islamic finance free from Riba often works under the umbrella of more traditional loans and the reverse mortgage is a good example of that.

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