Are you wondering how does Islamic finance works? Check out this article to know more about a halal mortgage.

Are you in the market for a mortgage but are worried if it complies with your religious beliefs? Islamic finance is an option that helps you raise money according to Sharia Law and doesn’t involve any haram procedures that don’t align with Islamic practices.

HOW DOES SHARIA COMPLIANT MORTGAGE WORK?

Islamic finance essentially requires the elimination of riba (growth and usury) and gharar (uncertainty and risk). Profit Rate is considered as riba and collecting or depositing it isn’t considered a fair practice in Islam. In simpler terms, Islamic mortgage has quite a similar process to rent agreements, and the profit rate for the bank comes in rent-like installments.

Rather than paying the EMI, a person pays the installments in the form of rent with no rate of interest involved. The title of the property is initially under the bank’s name for the given mortgage period, and the borrower has to pay fixed rentals until the tenure ends in order to get the property title transferred under their name.

There are two forms of Islamic finances, namely:

• Ijarah Financing, which is useful if you are buying off-plan properties since the entire payment isn’t made until the completion.
• Murabaha financing, where the bank pays for the property on your behalf, and then you pay them back in monthly rentals.

Islamic finance is a century-old practice that is being practiced by Muslims all across the globe. Sharia-compliant home finance is the best option for someone who wishes to buy a property but does not have adequate funds and doesn’t desire to breach their religious ethics.

At MyMortgage, we cater to your requirements and get you tailor-made mortgage solutions. Book a free mortgage consultation with us today and plan your journey towards a hassle-free loan procedure!