Switching from Conventional to Islamic Mortgage – Refinancing your home

There was a time when faith conscious Muslim American families did not have a sound alternative to a conventional home mortgage that was compliant with both U.S. and Islamic legal systems. The visionaries of Guidance Residential wanted to change that. In 1999 the company embarked on a multi-million dollar research and development project involving eighteen law firms and six of the world’s leading Sharia scholars to provide an authentic model of Islamic mortgage for Muslim American consumers. The Declining Balance Co-ownership Program was developed – and in 2002, Guidance Residential began operation in three states. A new era in the home buying and refinancing experience for Muslim Americans began.

The Benefit of Refinancing

Mortgage refinancing may allow a home owner to take advantage of cost savings options if the first mortgage term was not preferred or if the rates were too high due to market conditions. Refinancing may help a home owner decrease their monthly payment by switching to a lower rate when market conditions are favorable. For customers concerned with upholding the principles of their Islamic faith, and that have a conventional mortgage, switching to an Islamic mortgage with a Sharia compliant financier such as Guidance Residential can be a smart move.

The Difference between Conventional Mortgage and Islamic Mortgage

The primary difference between an Islamic mortgage offered through Guidance Residential and a conventional mortgage is the debtor and creditor loan arrangement. 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 home financing program that Guidance Residential created is based on an Islamic financial concept known as “Musharakah Mutanaqisa” or “Diminishing Partnership.” In this method, the relationship between Guidance Residential and the home owner is that of a partnership rather than a borrower-lender.

Refinancing: How to Change Your Conventional Mortgage to an Islamic Mortgage

The process of refinancing a conventional mortgage and replacing it with an Islamic mortgage from Guidance Residential begins with prequalification. Prequalification supplies the finance provider with an overall financial picture, including debt, income and assets.

The process is started either online by filling out a form (click this link for prequalification) or by calling an Account Executive (1-866- 484-3262) for assistance. The robust online tool can provide a prequalification result in less than 10 minutes and provides information on estimated closing costs and monthly payments. Once prequalified, the next step is to complete a refinance application. The application may be done with an Account Executive either over the phone, online or in person. During the application process, the refinance customer will be required to provide financial documentation to verify information.

Generally, refinancing an existing property is a more streamlined, faster and less complicated process than financing a new property. First, the property is already chosen and there is no “home search” to contend with. Also, the title work needed usually takes 24-48 hours versus a much longer wait time for original title work when purchasing a new home. The appraisal process is also streamlined as scheduling an appraisal is quicker since the appraiser deals with the homeowner directly rather than a realtor. Overall, the timeline from the start of the refinance process to completion is much shorter. With the online tools that Guidance provides and their professional and knowledgeable staff, refinancing can be a smooth process.

Refinancing Now Can Save Money

After the UK’s Brexit vote this year, mortgage rates and refinance rates in the United States were impacted. The global economic scenario led the mortgage rates and refinance rates to drop in the U.S. to a historic low. Senior economic analysts in the real estate market are suggesting that, for U.S. home buyers and home owners looking to refinance, this is a favorable time. According to the Wall Street Journal, lenders across the nation report that refinancing applications are up 10% to 40% compared to typical volume this time last year. The market conditions and low rates make a compelling case for refinancing a home before the rates rise.

Get Pre-qualified in less than 10 minutes for Refinancing: https://www.guidanceresidential.com/prequalify

Read related blog post: https://www.guidanceresidential.com/blog/post-brexit-why-now-is-the-time-to-refinance/

Learn more about Islamic mortgage USA here: https://www.guidanceresidential.com/faq