What is a Halal Mortgage?
Islamic mortgages have become increasingly prevalent in recent years with the Islamic finance sector growing approximately 15-25% per year. Islamic finance operates in accordance with shariah or Islamic law, which forbids the paying and receiving of interest or “riba”. A Halal mortgage ultimately provides prospective home buyers an opportunity to purchase a home without compounded interest. Islamic finance is founded on fundamental principles of ethics. Islam considers interest payments as an exploitative practice, which favours the lender at the expense of the borrower. Here, we will outline some of the various advantages of a Halal mortgage when purchasing a property.
Potential Lower Overall Cost
It is a common misconception that Islamic financing is significantly more expensive than conventional home loans. However, recent studies suggest that Islamic financing has evolved to be just as competitive as conventional loan services and may save individuals a significant amount of capital in the long-run.
No Compounded Interest
Islamic financing prohibits the payment or receiving of interest or riba. A Halal mortgage allows prospective buyers to work with companies such as Manzil in order to balance their material needs with their spiritual obligations. The property is purchased and then sold back to the client, and the sale is recorded in a Murabaha mortgage contract.The maximum repayment term is 25 years and individuals can repay their loan in full at any point in time without receiving a penalty.
Easy to Understand
Despite the various complexities of Islamic Finance, Halal mortgages are relatively simpler to understand. For the average person, keeping track of interest month to month is enough of a hassle that it is understandable why prospective homebuyers would look for a simpler alternative. Instead, customers repay their loan in equal instalments over the course of their mortgage.
Trusting Industry Professionals
With extensive industry experience, Manzil takes pride in their ability to help individuals find and purchase their future home. According to a recent report taken by the Pew Research Center, by 2030 there will be approximately 2.7 million Muslims living in Canada. As a result, more individuals will be looking to purchase Halal mortgages.