If you’re in the market for a new home, an Islamic mortgage may be the right choice. Halal mortgages are based on shariah law and allow Muslims who follow the religion to finance their purchases of homes and other major assets with ease.
However, not all financial institutions offer halal mortgages, so you’ll need to do some research before deciding which halal mortgage broker Melbourne is right for you.
This guide will explain what makes a mortgage “halal” or not according to Muslim law and how they work generally speaking; it also outlines what factors should inform your decision about which one to use if you’re considering an Islamic loan:
What is a halal mortgage broker?
A halal mortgage broker is a professional who works with you to find your ideal home loan.
What does this mean? It means that the mortgage brokers at their company will only work with banks or lenders that are considered “halal”.
This means they meet certain criteria when it comes to interest rates and fees. Once you’ve found an appropriate lender, they will help walk you through the process of getting approved for your home loan.
How does a halal mortgage broker operate?
- A halal mortgage broker will source Islamic mortgages from a variety of lenders.
- The broker will then negotiate with the lender to get the best deal for you.
- The broker will also help you fill out an application form and guide you through the process of applying for a halal mortgage.
Where does the money for Islamic mortgages come from?
When you take out a mortgage, you make regular payments to cover the principal of your loan. You also make payments on interest, which is money that the lender charges for taking on the risk of lending you money.
Islamic mortgages are based on a concept known as risk sharing between borrower and lender—which means that both parties share either all or some of the risks associated with defaulting on loans.
In exchange for taking on more risk than traditional lenders, Islamic mortgage providers typically charge lower interest rates and avoid charging fees altogether.
How does an Islamic mortgage work?
There are a few key differences between a conventional mortgage and an Islamic mortgage.
Firstly, the property is sold to the bank as a share of ownership (i.e., it’s not technically owned by the borrower). The bank then uses this money to buy shares in the property. It’s important to note that this does not mean that you can’t own your home outright!
You will still have full possession of your house, but the bank will have partial ownership through their shareholding through its investment in the asset.
Conclusion
An Islamic mortgage is a great option for Muslim homeowners who want to live in line with their religious beliefs. You should always do your research before you sign up for any type of loan or mortgage, so make sure you check out all of the options available and find halal mortgage broker Melbourne that works best for your needs.
