Islamic Mortgages

Many mortgage advisers seem unaware of mortgages that are appropriate for people who follow Islamic Law. As a brief introduction the following explains some points about these. Home purchase plans are also known as 'Islamic mortgages'. They serve the same purpose as a conventional mortgage they provide consumers with a means of buying a home but they are structured in a way that makes them acceptable under Islamic law. As it is forbidden to pay or receive interest under Islamic law, a home purchase plan is one of the ways Muslims can finance the purchase of their own home whilst keeping to their religious principles. The common characteristics of home purchase plans  A financial institution buys a property chosen by a consumer and becomes the owner.  The consumer enters into an agreement to buy the property from the financial institution at the original purchase price either by paying in full at the end of, or paying by instalments during the course of, a specified period.  The provider and consumer enter into a rental agreement, giving the consumer the right to occupy the property throughout the specified period.  Once all payments have been made at the end of the specified period, the financial institution transfers ownership of the property to the consumer. Another way which is acceptable under Islamic Law is the Murabaha method. The provider buys the property and immediately sells it on to the consumer for the original price plus an agreed profit margin. The consumer pays the higher price on a deferred payment basis in line with a fixed repayment schedule and to secure repayments, the provider takes a first charge over the property. For more information use the following link: http://www.fsa.gov.uk/smallfirms/your_firm_type/mortgage/home/finance.shtml

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