Purchasing or Refinancing a Residential or Commercial Property with Islamic financing involves the same steps that any other U.S. Residential or Commercial Property purchase or refinance requires. The difference is that the contract itself is halal, or sharia-compliant and the process is asset-based rather than credit-based Since conventional amortization schedules are used to calculate the amount of rent, Islamic Financing is really a reverse mortgage where the customer is basically saving up to take over ownership; so with each payment, their share of ownership increases. Because the money paid through PPG Islamic FInancing is considered rent, it stays compliant with Sharia law by insuring payments made are free of Riba (interest).
The Ijara ProcessWhether it's a Commercial or Residential mortgage or you are purchasing or refinancing, the Ijara Process is the same.
STEP 1 | PPG Islamic Financing creates a Trust for the client.
STEP 2 | The Trust purchases the property at the agreed-upon purchase price, therefore becoming the sole owner of the property.
STEP 3 |The Trust then leases the property to the client.
STEP 4 | The client makes the down payment – which serves as an advance rent payment – to the Trust .
STEP 5 | The client pays a percentage of the price every month as rent until they have paid off the purchase price (if property is not sold before the property is paid off).
NOTE | With each monthly payment made, the client’s percentage of ownership increases.
NOTE | The Trust collects the insurance and property taxes as part of the rent payments.
NOTE | Until the property is paid in full, the client does not own the property, they simply rent it.
NOTE | However, unlike your traditional renter, the client is obligated to upkeep and maintain the property, but they also have a lot more rights giving them the ability to:
>> Decorate >> Remodel >> Sublet >> Conduct any other activity that does not have a negative impact on the property value >> Sell the property at any time - If the client decides they no longer want the property and want to move out or purchase a different property, the Trust is required to sell the property to the client under the terms and conditions agreed upon in the initial contract and the client becomes the sole owner. Important Note: Although the client has the right to purchase the property, they are not obligated to do so.
STEP 6 | Once the full amount is paid and the client reaches 100% ownership of the property, the client can buy the property for $1.00
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