Guidance Islamic Loan Free According To

Benefits of the Co-Ownership Model In a conventional loan situation, homeowners are typically left on their own in the case of a natural disaster like a hurricane or tornado.

Not only is it accessible, it has become a competitive alternative to conventional home financing.

Its an affordable option for those who wish to achieve homeownership in an equitable manner without compromising their values.

How is an Islamic Mortgage Different than a Conventional Mortgage The primary difference between Guidance Residentials Islamic home financing and a conventional mortgage is the type of relationship at the heart of the transaction.

A conventional mortgage is a loan from a creditor to a debtor, whereas Guidance Residentials approach is completely different it is a partnership between co-owners.

Guidance Islamic Loan Free According To

Riba (Interest) Free According to Islamic legal jurisprudence, lending money to profit from any commercial or investment activity including the financing of real estate is not an acceptable method of commerce.

The most obvious reason is that in Islam, a loan is meant to be a form of charity an opportunity for one person to help another who experiencing a difficult situation.

The lender should only expect to be repaid the exact amount they lent.

It is also not permissible in Islam to buy or sell something that has no intrinsic value.

A loan with interest is essentially paying for money with more money.

Money has no intrinsic value, so it cant be purchased.

This rule enhances stability in the market for benefit of the community.) With a mortgage loan arrangement so clearly unacceptable according to Islamic financial guidelines, Guidance Residential developed a home financing program on an entirely different foundation: a partnership.

Co-Owner vs Lender While interest-bearing loans are not allowed under Islamic financial law, joint business ventures are permitted.

So Guidance Residential developed a Co-Ownership model of home financing that is uniquely suited for American Muslim home buyers.

A borrower, or debtor, is beholden to the lender, so they have little power in an inequitable relationship.

This unequal relationship is understood in the common saying, You owe me) The debtor faces nearly all of the risks alone, bearing the brunt of misfortunes such as natural disasters, eminent domain or foreclosure.

A partner, on the other hand, is an important and valued member of an equitable relationship.

The Co-Ownership Model The home financing program that Guidance Residential created is based on an Islamic financial concept known as Musharakah Mutanaqisa or Diminishing Partnership.

When a home buyer decides to bring Guidance in as a co-owner in a home, the rights and responsibilities of both parties are spelled out in the Co-ownership Agreement.

Guidance acquires its co-ownership stake through a Limited Liability Company specifically created for this purpose.

Although both co-owners would have the right to occupy the property in this transaction, Guidance gives the customer the exclusive enjoyment and use of the whole property.

In exchange for this exclusive right, the customer pays Guidance what is known as a Profit Payment.

This Profit Payment is part of the customers monthly payment to Guidance Residential.

The other part, called the Acquisition Payment, allows the customer to gradually buy out Guidance Residentials shares of the home.

Together, these two amounts make up a predictable monthly payment that is competitive with the monthly payments in a conventional mortgage.

As the customer makes Acquisition Payments to acquire a further share in the property, Guidances ownership share decreases.