Everything You Need to Know About Islamic mortgage
What is Islamic Mortgage?
According to the Islamic tradition buying a property or any asset by fixed interest rate is considered to be a haram which means it is not legal in the Islamic religion to earn a profit on someone's earnings; thus, they have a different set of rules and principals whose foundations are based on sharia-compliant. Let us see what these rules are and how they work.
Uneek Homes interest free Islamic mortgages
Instead of borrowing money and paying interest to the bank, you pay monthly instalments to own the property with Uneek Homes. Uneek Homes purchases the property and becomes the authorised owner. You then make monthly payments according to your affordability, until final payment is made. Then the title deeds of the property get transferred into your name.You may say that Uneek Homes do not give loans; rather, they offer you an opportunity through sharia-compliant modes of investment and transaction.
How much down payment do you need for an Islamic mortgage?
Here the deposit you need to pay might be a little higher than the conventional home loans; to hire the property, you need to pay 20 percent of the property.
Are Islamic Mortgages for Muslims Only?
Anyone apart from the Muslim community can also apply for an Islamic mortgage. There is no such rule prohibiting non-Muslims from taking advantage of these mortgages. One needs to follow the procedure and go through the terms and conditions required for such finances. Find out more about investing with Uneek Homes.
How Much is Stamp Duty Applicable on Islamic Mortgages?
As it involves a two-way transaction, the property has been bought and sold twice, firstly by the bank then by the buyer, so stamp duty is charged on each transaction which will add up to the final amount paid by the buyer making it more expensive however there was a change in the law in 2003 to stop this.
In the U.K., the followers of Islam raised their voices against higher taxes which ultimately led to the new scheme brought in by labour in 2005 permits the Islamic followers to buy the property without paying the tax. The stamp duty is applicable on properties worth £125,000 and over. It is not required to pay on properties that are sold immediately.
Where to Find Islamic Mortgages in the U.K.?
These mortgages are certainly facing shortage due to which it is often expensive compared to standard mortgages. That why Uneek Homes Islamic mortgages are becoming so popular. You can find our more about our interest free Islamic mortgages
Disadvantages of Financing Through Islamic Mortgage.
Paying rent is not that easy market can fluctuate anytime, facing ups and downs in the prices.
Although the bank is the property's legal owner, you still need to pay the costs of insurance, general maintenance, and conveyancing and stamp duty on the initial purchase.
Bank requires more inquiry than usual, so more diligence work needed to be done.
It is not always necessary that sharia-compliant is agreed upon the international financial terms and conditions.
As there is no interest thus, it is harder to claim some Islamic instruments as debt.
Though it has some disadvantages, still it is preferable by many investors due to the reason that Islamic banks work on ethics that are based on sharia-compliant which prohibits the banks from investing the profits in gambling, alcohol, tobacco, or pornography, hence this is the reason why even non-Muslim community is interested in taking out Islamic mortgages and share the of their investment for some good cause.
Principles Related to Islamic Mortgages.
Buying a new house can be exhausting as one requires a proper plan and system to arrange a good sum of money, for which the buyer goes to the bank to get some loan on the house. Still, it is much more inconvenient for a Muslim who has to look for banks that provide Islamic mortgages. These mortgages work on the four main Islamic finance principles, these are:
1. Riba
According to the sharia laws and provisions, Riba means the interest that is strictly condemned for Muslims. Regarding this law, a Muslim can purchase property, but he does not need to pay interest on a loan. Rather, he has to pay the rent to the bank.
2. Ijara
It is often called Islamic leasing; this means that a bank or society building will finance the property on your behalf and leaseback to you on a fixed monthly amount agreed between you and your financier.
3. Musharakah
It is a joint venture in which one can own separate shares in the property with the bank. The bank's shares will reduce with time when you pay more and more monthly payments, and sooner you become the house owner independently without any bank shares.
4. Murabaha
In this case, the bank buys the whole of the property and sells it back to you at a higher price. This decided price is paid in instalments to the bank through which the bank can cover the cost, and the buyer need not pay the interest on the mortgage loan.
Process for Taking out Islamic Mortgage.
The process is quite easy and very much similar to the traditional mortgage.
• The buyer will select the property he wants to purchase
• Both the buyer and the seller will agree on the price.
• The Islamic mortgage provider will buy the property.
• The Islamic mortgage provider will sell the property to the buyer at a higher price.
• As a buyer, you will repay the bank in monthly instalments.
Conclusion
The world is growing at a rapid speed. Money Investments in housing finance are increasing and creating a great demand for loans that come up with different strategies and attractive offers. Still, they all function through the money they get by charging a high amount of interest on loans; thus, the Islamic financial system, including Islamic mortgage, is the only way to finance your loan without paying high-interest rates to the bank. That is the reason that the Islamic financial system is gaining popularity globally and why so many are signing up to Uneek Homes.