FCYD

Part : 1

We speak to bankers, both Islamic and conventional, and laymen, both sincere and cynical, and compile twenty-one of the most commonly asked questions about riba and mortgages:

Hes a good Muslim. He prays, he fasts, he pays zakat. He regularly performs voluntary acts of obedience. Hes a caring family man and a respected member of the community. By every outward measure, he appears to be leading the life of an exemplary Muslim.

But, somewhere along the line, he reconciled his views on interest-based finance, particularly in relation to conventional mortgages, with his religious beliefs. He became convinced, like countless other Muslims, that Islam permits one to take a conventional mortgage to finance the purchase of a home.

The question is not whether riba is impermissible; the verses in the Quran are clear enough. The question for many is: Is the riba in the Quran the same as the interest on my home loan?

We spoke to bankers, both Islamic and conventional, and laymen, both sincere and skeptical, and compiled twenty-one of the most commonly asked questions related to conventional mortgages. We confirmed the answers with qualified scholars who referred back to the Quran; sunna of the Prophet (Allah bless him and give him peace); the scholarly consensus of the traditional schools of jurisprudence; and the Shariah standards of the worlds largest regulatory body governing Islamic banks, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

The following are actual questions posed by genuine Muslim homebuyers and industry practitioners:

1. How is the riba Allah has forbidden the same as ordinary interest? I thought riba refers only to usury.

The Quranic verses and hadith are clear on the prohibition of riba. What is not clear to some is the meaning of the word riba.

Understanding this is particularly relevant to understanding the permissibility of conventional mortgages.

The present answer seeks to show that differences in interpretation do not originate from a substantive change in the nature of the circumstances since the time of the Prophet (Allah bless him and give him peace), as some claim, but rather from a change in the common usages of the words usury and interest. So while the original meaning of the word usury referred to any charge over the principal according to Old English Law1, the modern meaning of the word underwent a process of evolution.

Essentially, a change in language, not a change in commerce.

Allah deems only two sins worthy of a war from Him: enmity with His friends and dealing in riba. Few Muslims doubt the enormity of dealing in riba, clear in Allahs words in the following verse:

Those who eat of riba shall not rise (on Judgment Day) except as those arise who are smitten by the Devil with madnesswhich is because they say that trade is but like riba, though Allah has made trade lawful and has forbidden riba. So whoever is reached by a warning from his Lord and desists may keep what was before (Allah forbade it), and his affair is with his Lord. But whosoever returns, those are the denizens of hell, abiding therein forever.

Allah extirpates (all benefit from) riba, but makes charity bounteous, and Allah loves no sinful ingrate.

Verily, those who believe and do righteous works, who perform the prayer and give zakat, they possess their wage with their Lord: no fear shall be upon them, nor shall they grieve.

O you who believe, fear Allah, and give up whatever remains of riba, if you be believers.

But if they do not, then be apprised of war from Allah and His messenger, though if you repent, you may keep your principal, neither wronging nor being wronged (Quran 2:275-79)

And the words of the Prophet (Allah bless him and give him peace) found in this and other rigorously authenticated (sahih) hadith:

The Messenger of Allah (Allah bless him and give him peace) cursed whoever eats of riba, feeds another with it, writes an agreement involving it, or acts as a witness to it. (Muslim)

And the expert legal opinion (fatwa) of one of the worlds leading Islamic finance scholars, Justice Mufti Muhammad Taqi Usmani, defining riba:

The concept of riba was widely recognized among the addressees of the Holy Quran, and it is that concept which is reflected in the legal definition provided for riba either in the hadith or in the later literature of Islamic jurisprudence. According to this definition, any transaction of loan where the payment of an additional amount on the principal is made conditional to the advance of such a loan is called riba.2

Confusion, spread primarily by the more modernist readings of the Islamic Sacred Law in the first half of the 20th century, arose on whether riba refers to usurious levels of interest alone, or refers to commercial interest as well, the kind found in conventional mortgages.

Two issues are involved here: 1) the incorrect and widely-held belief that interest was, in previous times, only usuriously excessive by nature; and, 2) the popular notion that pre-modern forms of finance served primarily consumptive, not commercial, needs.

A brief look at history is instructive.

Commercial interest, as practiced today even at single digit rates, was well-known and widely-practiced among Abrahamic societies, even over four thousand years ago, mostly as a form of institutionalized agricultural finance, not just as a form of usurious consumption finance, borne out by substantial historical proof.3 Later, even the concept of credit risk became well understood, with Byzantine traders contemporary to the Prophet (Allah bless him and give him peace) borrowing on standardized rates of interest, rates that varied by profession.4

The Prophet (Allah bless him and give him peace), his Companions, among whom many were previously moneylenders, and all those trading in the Arabian peninsula during the 7th century were thoroughly familiar with the widespread practice of commercial interest-based lending: charging for the use of money with an additional sum over the principal amount.

Modernist Islamic discourse on the inadequacies of an interest-free economy is highly reminiscent of the arguments favoring interest given by medieval Christian theologians. Three centuries before pro-interest Calvinism reached its full stride, the slippery-slope justifications that marked the beginning of the end of the Churchs interest prohibitions began, most openly, in the 13th century with the introduction of a time-based penalty charge on an interest-free loan.

The charge was called interesse.

About a hundred years later, this charge evolved into one that could be incorporated into the contract itself as part of the loan, not just as a penalty for late payment, but as a charge just for the use of the funds.5

The last stage of this recidivism came in 1920 when the Church itself issued the following statement: in lending a fungible thing, it is not itself illicit to contract for the payment of the profit allocated by law, unless it is clear that this is excessive, or even for a higher profit, if a just and adequate title be present6

Even the modern dictionary attests to the true origins of the word usury: 1. the practice of lending ‘money at an exorbitant interest rate. 2. an exorbitant amount or rate of interest. 3. Obs. Interest paid for the use of money7 The first two definitions are the norm, the third, the point. That it became obsolete (Obs.) is testament to the fact that usury was once regarded as none other than non-exorbitant interest.

From the beginning of Islam to the present day, the overwhelming majority of Muslims, both scholars and laymen, have regarded riba, usury, and interest as but one in meaning. To follow this is to follow the words of the Prophet (Allah bless him and give him peace) to adhere to the jamaa (overwhelming majority of Muslims). (Ahmad)

2. How does interest harm society? Isnt it a necessary part of every economy.

Muslim societies are a living example of the debilitating effects of interest-based finance. Most sadly reflected in just about every Muslim country in the world, with daily-ballooning interest payments to the World Bank, International Monetary Fund, and other industrialized nations agencies; notably, at low rates of interest. Interest payments that, quite unproductively, draw valuable funds away from healthcare, education, sanitation, infrastructure, and any number of other governmental responsibilities.

Debt creates dependence, and dependence provides the opportunity for control.

The following two passages are particularly relevant for those who claim that interest-based development actually works:

According to UNICEF, over 500,000 children under the age of five died each year in Africa and Latin America in the late 1980s as a direct result of the debt crisis and its management under the International Monetary Funds structural adjustment programs. These programs required the abolition of price supports on essential food-stuffs, steep reductions in spending on health, education, and other social services, and increases in taxes. The debt crisis has never been resolved for much of sub-Saharan Africa. Extrapolating from the UNICEF data, as many as 5,000,000 children and vulnerable adults may have lost their lives in this blighted continent as a result of the debt crunch.8

Debt is an efficient tool. It ensures access to other peoples’ raw materials and infrastructure on the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range of products because of Northern protectionism and their lack of cash to invest in diversification. Market saturation ensues, reducing exporters income to a bare minimum while the North enjoys huge savings. The IMF cannot seem to understand that investing in(a) healthy, well-fed, literate populationis the most intelligent economic choice a country can make.9

Further, price inflation and increased market volatility, the usual concomitants of a highly leveraged economy, affect poor and rich countries alike. To add to this, poorer, debtor countries typically find their currencies devaluing as they struggle to repay loans in their creditors currency.

The realistic alternative to debt is the one already employed to good use in successful Western economies: equity, upon which most Islamic finance products are based. In comparison to debt, equity provides the most resilient and least damaging source of capital for individuals, businesses, and economies.

Besides the ravaging macroeconomic effects of debt, problems also appear at the level of the individual. A 2001 study at Bath and Exeter reveals that students who fear they may fall into debt are four times more likely to suffer from depression.10 For those students who are actually in debt, the numbers may be worse.

The correlation between indebtedness and illness is particularly alarming given the widespread use and social acceptability of interest-based consumer finance, including home financing, which also offers the all too convenient option of multiple mortgages.

Debt finance expands the range of possibilities available to us, and for some, to unsustainable levels, making it possible to own things one cannot afford with money one may never have. Allahs command, after all, is not intended for His benefit, but for our own.

Islam recognizes that the choices we make as individuals affect all society, and that to support an interest-based institution, even with a seemingly benign conventional home loan, is to support the broader framework of banking institutions largely responsible for todays widespread global poverty.

3. Does Islam permit conventional mortgages?

A conventional mortgage is a loan of money on which interest is charged. It constitutes a cash loan advanced by a bank or mortgage agency to finance the purchase of a property. The homebuyer agrees to repay the principal in addition to making an interest payment, while nonpayment of either entitles the bank to seize title. Some money today for more money tomorrow.

The lender takes no equity position in the property. The lender provides no service. There is no usufruct of the lenders assets. The lender provides only some cash today for more cash tomorrow. Riba, no less, and forbidden.

Source: Ethica Institute of Islamic Finance.

Mortgage interest rates are ever changing due to the status of the economy.  There are several other factors that effect interest rates related to mortgages.  To understand what effects an interest rate is to understand why it is consistently fluctuating. 

What effects a mortgage interest rate? 

There are several factors can that influence a change in rate.  First there are bonds.  The general term bond in this case relates to mortgage backed securities.  It is a simple formula in that when a bond sells for less, the interest rates will increase.  When a bond sells for more, interest rates will then decrease.  As we are currently in a state of flux with our economic status, rates are changing from week to week. 

Why are mortgage interest rates continually unstable?  Even due to changes in mortgage backed securities, emotions are truly the most swaying factor in interest rate determinations.  Individuals who may read about stocks, employment/unemployment data, and economic information are effected by this news.  Even hearing about a mass set of purchases within a certain state or county can influence others to consider the purchase of a home.  People effect people.  A trend, is just that, a trend.  This is why interest rates can not only change from week to week, but also from day to day, and even hourly.

In this, supply and demand becomes an issue that also effects interest rates for mortgages.  In a location such as Milwaukee, Wisconsin, where there are often several homes for sale on a consistent basis, there may not be as much of a demand for a home purchase as say in Sedona, Arizona.

The availability of homes for sale in beautiful Sedona, Arizona are few and far between, increasing the want and overall demand for real estate in the area.

Additional factors such as growth in GDP (gross domestic product), inflation and prices of oil can also make slight changes to interest rates affecting mortgages. 

As of today, there has been a drop in interest rates. This has encouraged those looking to purchase a home to act quickly.  It is also encouraging those who were looking to sell their home, to make pricing adjustments, and/or get their property on the market. 

It is always in a buyer or seller’s best interest to be informed, but to also be prepared for interest rates to drop so they can make their move.  By getting pre-approved for a home loan, one can then watch interest rate trends, and purchase when the time is right.  Additionally, finding an informative realtor to aid in your purchase or sale can also prove to be a good decision.

Oakville is a bustling city just outside of Toronto with a population of just over 180,000 people. However, those who live in Oakville often feel that they live in a city much larger than that, as tourists are always flocking in from all over the country – usually for any one of the annual festivals the city holds, such as the Downtown Oakville Jazz Festival, the Waterfront Festival, and For the Love of the Arts Festival. But because Oakville doesn’t have the massive population that the city of Toronto does, homebuyers often find Oakville mortgages much more affordable. And, because the city still lies within the boundaries of the GTA (Greater Toronto Area,) if what you’re looking for isn’t in Oakville, it’s just a stone’s throw away.

When it’s time to relocate, or just move around inside the city, here’s your guide for Oakville mortgages.

•  Although Oakville is very close to Toronto and its downtown core, Oakville mortgages are often much more affordable than those you’d find right inside of Toronto.

The average loan amount for Oakville mortgages is 8,662.

• The average amount for an applicant’s income on an Oakville mortgage is slightly higher than the average income needed in other, smaller areas of the province. However, those wanting to live in Oakville still don’t’ need to have luxury salaries; the average income on an Oakville mortgage application is ,746.

• The average age on Oakville mortgage application is 40 years old.

• The Oakville mortgage market has a fairly high provincial ranking, coming in at 13 on the list.

• The Oakville mortgage market is one in Canada that’s expected to grow quite rapidly within the coming year. As of March 2012 the national contribution from the Oakville mortgage market was 0.67%. Within 12 months that’s expected to grow to 0.72%.

• The mortgage market in Oakville reacts fairly typically to consumer demands and spurts and stutters at certain times that are also seen throughout the rest of Canada. March, when the spring market is just starting to pick up, was the busiest month for Oakville mortgages in 2011 with 12.4% of all mortgage activity taking place at this time. December on the other hand, a time when people are busy spending on holiday shopping instead of house hunting, was not surprisingly the month that saw the lowest percentage of mortgage inquiries, with only 4.1%.

Oakville is a great place in Ontario to live but unfortunately, many homebuyers also incorrectly assume that it’s going to be one of the most expensive – simply because it’s located within the GTA. But that very fact is the one thing that works for Oakville mortgages, not against them. Being so close to Toronto is definitely one of the biggest benefits that comes with living in Oakville; and it doesn’t necessarily mean that you need to pay any more on your mortgage to enjoy those benefits. When you’re looking to move to Oakville, and enjoy everything tourists do, but all year round, speak to an Oakville mortgage broker about the many options you have available to you.
 

The American dream is the belief that, through hard work, courage, and determination, each individual can achieve financial prosperity. Most people interpret this to mean a successful career, upward mobility, and owning a home, a car, and a family with 2.5 children and a dog.

The core of this dream is based on owning a home. Since your house is likely to be the largest financial obligation you’ll ever have, mortgages New Jersey were created to assist you in paying for it. A mortgage loan is simply a long-term loan given by a bank or other lending institution that is secured by a specific piece of real estate. If you fail to make timely payments, the lender can repossess the property.

Because houses tend to be expensive – as are the loans to pay for them – banks allow you to repay them over extended periods of time, known as the “term”.

Terms can range anywhere from between 10 to 30 years. Shorter terms may have lower interest rates than their comparable long-term brothers. However, longer-term loans may offer the advantage of having lower monthly payments, because you’re taking more time to pay off the debt.

In the old days, a nearby savings and loan might lend you money to purchase your home if it had enough cash lying around from its deposits. Nowadays, the money for home loans New Jersey primarily comes from three major institutions: The Federal National Mortgage Association, known as Fannie Mae; the Federal Home Loan Mortgage Corporation (known as Freddie Mac); and the Government National Mortgage Association (known as Ginnie Mae). The bank that holds your loan is responsible primarily for “servicing” it.

When you have a mortgage loan New Jersey, your monthly payment will generally include the following:

•An amount for the principal amount of the balance
•An amount for interest owed on that balance
•Real estate taxes
•Homeowner’s insurance

If you are looking to refinance your mortgage, then it is better for certain types of mortgage refinancing to look on the Internet or looking to hire a mortgage broker. A mortgage broker is the best person to give expert advice on refinancing mortgage rate financing companies that offer different. And if you’re happy to work with a mortgage broker and want to do the job yourself, then the Internet is the best option. This really saves time and fuel costs in town to see views of its various citations.

The acquisition of a mortgage is very beneficial, not only get to pay their debts and overdue bills, but you can have some money stacked away for other needs or requests may affect you or your family. The best part of a mortgage refinancing is to reduce the interest rate that is very beneficial for you in the long run.

However, before taking a bath in a refinancing plan, you need to compare different mortgage rates for the best deal possible. There are many owners out there looking for a good plan for refinancing, but the first thing to do is deal with a reliable and secure funding to provide one of the best mortgage rates on the market. The feeling of working with a reputable company or financial affairs of some banks, if you w ant to get through the entire transaction and the duration of the loan without any problems.

There are several reasons why people go for mortgage refinancing rate and the main reason is generally unable to meet the installments powerful or if there is a liquidity crisis or debt consolidation. But whatever your reason to refinance a mortgage has a lot of weight on your shoulders, if you shop carefully for it. So make sure you do a lot of work into it and check the various mortgage rates before signing. Lenders know that people nowadays are very internet savvy and can get all the information you need on mortgage refinancing rate very easily and they are full of information.

The choice of mortgage rates to suit your needs is difficult. You can find a variety of mortgage brokers, online marketers are willing to offer their bids online to compare a number of mortgage market comparison price of its largest banks, credit unions, trust companies, mortgage lenders and brokers special. Finding refinance mortgage rates could not be easier.

The chattel mortgages are very popular in business as they allow the traders and corporations to secure loans against their motor vehicles. The one thing which can never be ignored when it comes to the chattel mortgage is that vehicle must be used largely for the business. This is one of the qualifications for the loan. The loans are available to both sole proprietors to large enterprises.

In most cases, the loan repayments are on a monthly basis and you will get to enjoy the chattel mortgage without the obligation of termination fees or exit fees. You will however need to find the right loan firm to handle your loan for you to enjoy the benefits fully.

How it operates

After you have got the business vehicle, you are in a position to pay the amount that is well spread over the period in which you will be using the vehicle.

The payments are structured to fit the cash outflow of the business as compared to the value of the car in full. You will find it very good especially because you get to enjoy smooth payments and at the same time have a credit source. The best thing about the loan is that it can be cut to fit the requirements that you could have.

Main Chattel Mortgage Advantages

You get to generate income using the car as soon as the application date and the payments will be deferred to the future of your business.

You will also find that you won the vehicle from the very first minute that you get into an agreement with the financial institution or firm.

Whenever the car is used for income generation, you will have the access to any possible benefits as far as tax in concerned. The benefits can be numerous and they can largely favor your business.

After you have passed the approval for the loan, it is possible for you to get full financing for the car without even having the need to pay any deposit for it. This is one of the easiest ways of getting what you want without sweating for it.

The other advantage with the chattel mortgage is that you can get any kind of car financed. This means that you can have used, privately sold or even new cars financed.

You will enjoy loan lending which is very huge as compared to bank loans and best car loans even enjoy same day approvals for the loan. The short period and fast services have saved many businesses as they manage to get back on track fast.