Mortgages for downsizers

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Mortgages for downsizers

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mbeirnes

Joined: 28 Oct 2004
Posts: 100

Posted: Mon Dec 20, 04 4:41 pm Post subject: Mortgages for downsizers
Bit of a cunumdrum... I want to have a very small income and live on a 5 acre farm and not live. Anyone know a bank that would give me a mortgage for about half a million?

tahir

Joined: 28 Oct 2004
Posts: 45674
Location: Essex

Posted: Mon Dec 20, 04 4:44 pm Post subject:
How much would the property be worth? Have you got any equity to put in? How small an income are you looking at? Have you looked at a muslim mortgage?

mbeirnes

Joined: 28 Oct 2004
Posts: 100

Posted: Mon Dec 20, 04 5:04 pm Post subject:
What on earth is a muslim mortgage? Would I have to change faith? I would reckon about 200k equity (at a push) need to do some decorating The property would be worth 700k and there would be only income generated by the proprty as I would be lord of I survey and not going to work

tahir

Joined: 28 Oct 2004
Posts: 45674
Location: Essex

Posted: Mon Dec 20, 04 5:11 pm Post subject:
I reckon it's possible. i'll see what I can dig up on islamic mortgages for you

tahir

Joined: 28 Oct 2004
Posts: 45674
Location: Essex

Posted: Mon Dec 20, 04 5:18 pm Post subject:

Here's a brief overview:

Islamic Mortgages

It is against Islamic law to pay or receive interest, this has been a huge problem for Muslims living in Britain. When it came to home buying it was only the very rich, who could afford to buy a home outright. Fortunately however many banks and building societies are starting to recognise this as a problem and are offering an alternative.

There are two options available to you that correspond with Muslim law:

� The Murabaha (Deferred sale finance) Mortgage
� The Ijara (lease to own) Mortgage

The Murabaha Mortgage:

This is only really an option for individuals/families who have a fair amount of capital behind them, because it is a condition of this Mortgage package that you are expected to pay (circa.) 20% of your home�s value, on the day of purchase. However from that day the house will be registered as your own. You may pay off any debt that is outstanding on your home at any point. This package offers a fixed repayment period that is agreed between you and your lender, any a monthly repayment amount that is fixed for the term of your mortgage.

So how does the Murabaha Mortgage work?; When you find the house that you wish to buy, you arrange a sale price with the vendor as normal, however the bank pays the purchase price, then immediately sells the house to you at a higher price (the higher price is determined by the original price of the property, and the repayment period that you will have agreed with the lender), minus the percentage you pay as deposit.

The Ijara Mortgage:

This is a slightly more popular choice of mortgage, as you do not need a large amount of capital behind you to set up this mortgage, it is also slightly more flexible than its counterpart. An extra benefit to this type of mortgage is that it can even be taken out to replace an existing interest mortgage. The amount you pay each month is usually fixed yearly. The outstanding balance can be paid off at any time (usually) without incurring any penalties.

So how does the Ijara Mortgage work?; As with the Murabaha mortgage, you find a property that you wish to buy, and agree a purchase price with the vendor, the difference is that; your lender will then purchase, and gain ownership of the property. You will enter into a lease agreement with the lender. Each month you will be expected to pay rent to your lender and a contribution towards the purchase of your property.

We advise that you shop around to find the right mortgage deal for you. If you have any further queries or for more information, fill out or quick enquiry form and speak to one of our advisors.

Most banks now offer Islamic mortgages but they don't publicise them, if you're interested I'll dig out more info for you. As far as i know you don't have to be a muslim

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28238
Location: escaped from Swindon

Posted: Mon Dec 20, 04 5:49 pm Post subject:

I always wondered about these questions, thanks Tahir for some answers.

The question remaining is what happens if you fail to keep up your repayments, under the "interest" system your debt "compounds" and leaves you deeper and deeper in trouble

Does the Muslim Mortgage behave differently? My very limited knowledge has left me suspicous that Muslim systems in the modern world are likely to be more about sleight of hand to remove the reality of interest from plain sight, rather than the interest not really being there.

jema

tahir

Joined: 28 Oct 2004
Posts: 45674
Location: Essex

Posted: Mon Dec 20, 04 5:53 pm Post subject:
I'd assume that if you can't meet repayments you get penalised and eventually evicted, hopefully with your equity still intact. Like i said if anyone's interested I'll find out more, one of my nephews did part of his thesis on the ethics of finance in islamic law (or something )

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