Important Reminders for Mortgage Loan Borrowers and Refinances

PROBLEMS-QUESTIONS-SOLUSIONS

 PROBLEM 1-For devout Muslims the Problem: Islam considers lending with interest payments as an exploitative practice that favors the lender at the expense of the borrower.  Sharia law prohibits mortgage and other conventional loans because of the prohibitions on interest and unequally shared risk.

Similar Rules Apply to Those of Jewish Faith. There is a similar Jewish law that prohibits Jewish individuals from charging interest to other Jews.

SOLUSION 1-  Shariah compliance is one of the major challenges facing Muslims and Islamic institutions. In the securitization of assets, Islamic financial institutions initiate separate special purpose vehicles in order to indirectly engage in interest-based transactions.

IJARA-LEASEBACK CONFIGURING

The Islamic financing model has found that one solution is to use a trust to avoid paying interest on money borrowed directly. In this process, an individual trust takes ownership of the property and the technique is called “Lease to Buy” (Ijara wa Iqtina).

A configuring essentially changes the nature of the transaction from a rent-on-money transaction (Riba) to buy-sell or  rent-on-property (murabaha or Ijara-leaseback) transaction. We provide of configuring for conversational mortgage-holders that are already happy with their rates and terms of their currently mortgage, but just want to convert it to be sharia-compliant.

We can structure not only the Mortgage loans you have previously received, but also your new Mortgage financings in this model.

You can choose the mortgage lender or bank with the most suitable terms for you.

In the Our Beneficial Financing Model, Ijara-wa-Iqtina (lease and ownership) process allows Muslims to create a rent-to-own agreement in which the home’s inhabitant becomes a renter, thus abiding by Sharia principles.

Our Configuration process is asset-based rather than credit-based Islamic financing method that has been used in the U.S. and Canada for more than 20 years. Similar to conventional auto leases, the Ijara loan sets up a lessor-lessee relationship rather than a creditor-debtor relationship.

you can review for detail DEVELOPING ALTERNATIVE FINANCIAL INSTRUMENTS WITH CONFIGURING – Global Finance Platform

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PROBLEM 2-Every time you make a mortgage payment, it’s split between your Principal – the amount of money you initially borrowed – and your interest. Most of your payment goes towards interest during the first few years of your loan. You owe less in interest as you pay down your Principal. At the end of your loan, a much larger percentage of your payment goes toward principal.

Let’s say you borrow $150,000 to buy a home at 4% interest with a 30-year term. By the time you pay off your loan, you will have paid a whopping $107,804.26 in interest!!! This is in addition to the $150,000 you initially borrowed.

SOLUSION 2-That if you pay every month toward a lease with the exact same term, with our Financial Planning-Leaseback model and special payment system.

You will have 118 months’ rental advantage in total. In other words, if you are going to pay 242 months of rent (20 years and 2 months), with the same amount of rent.

However, with the previous application, you will pay for 360 months-30 years.

For example, your monthly (Principal + interest) payment will be $608 x 118 Months = $71,744 for 9 years, 8 months’ advantage.

In short, you early start working with our model, the more you’ll save. This is mainly because mortgage payments are interest-heavy in the beginning of the term. If made soon after you take out your mortgage. Its value diminishes over time since less interest is due later in the loan term

Of course, the borrower who with our model won’t have to make payments the full 360 months because they’ll also wind up paying off their mortgage ahead of schedule.

EXTRA ADVANTAGES WITH HIRE CONFIGURATION MODEL

Making an Extra Lease Payment Each Year

Some homeowners prefer to make an extra lease payment each year with Leaseback Configuring Model

Perhaps related to a tax refund check or from a year-end bonus at work

This is another good strategy to cut your lease term and save lots of money

And ensure that the bonus money you receive is put to good use as opposed to spent frivolously

You could also make one extra lump sum payment at the beginning of each year, perhaps after receiving your year-end bonus.

So let’s say you make a $1,000 bonus payment each year in January, starting in month 13.

That would save you $19.005.22 in lease and shave 85 months (just over 7 years) off your lease term.

Now let’s assume that you came upon some extra dough and want to make one lump sum payment to reduce your mortgage balance.

Using our same loan details from above, if you made a one-time extra payment of $5,000 to principal in month 13, you’d save $10,071.67 and reduce your loan term by 31 months.

Paying the lease with our model to own your home sooner is one benefit

But you’ll also save a ton on interest when your configuration of your home mortgage

So it’s actually a double win for very little effort

You will both return to the interest-free application and become a home owner sooner.

Where else are you going to save nearly $100k?