What is difference between conventional mortgage financing and Islamic Mortgage financing?
Another question is appeared in finance living problems. This is because Islamic or Sharia finance stared giving best solution of finance crisis. Generally, Islamic or Shari finance look like has no great income and profit, but Islamic or Shari finance system are survived in some monetary crisis. This is way Islamic or Shari finance are challenging and interested in implementing. Previously, we had described about the differences between conventional and Islamic banking. Now, we explain about mortgage.
Back to the question: what is differences between conventional mortgage financing and Islamic or Shari mortgage financing? Under conventional mortgage, in order to purchase a property the customer borrows money and repays it with an additional amount over a period of time. The additional amount is the amount of interest which is against the Shariah rulings of Islam. Under Islamic mortgage finance facility, Islamic bank shares with the customer in purchasing his desired property. Accordingly, the customer and the bank become the joint owners of the property in proportion to their share in purchasing the property. In order to own and use the entire property, the customer purchases the share of bank property over a period of time and also pays the rent for using the bank share of the property. Over a period of time, the customer manages to purchase the entire share of bank in the property. Ultimately, the customer becomes the sole owner. Further, in case of Islamic mortgage finance, the rent will be charged after the lessee has taken delivery of the property and it is in workable/usable condition. Rent cannot be charged from the day the price was paid to acquire the property/asset. If the supplier has delayed the delivery after receiving the full price, the lessee should not be liable for the rent of the period of delay. In case of conventional mortgage finance, normally the lease rentals starts from the date the bank make payment for purchasing the property/asset.
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