Why Refinance Your Home with Islamic Home Financing

diagram of house on a desk

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. As a result, many Muslim families may have found themselves in a conventional loan contract that includes the prohibited practice of riba. Now, with Guidance Residential, it’s easy to switch to an authentic, halal alternative.

Guidance Residential has been offering an authentic Shariah-compliant mortgage alternative since 2002. The company’s Declining Balance Co-ownership Program ushered in a new era in home buying and refinancing for Muslim Americans, as well as non-Muslims who are drawn to the more equitable arrangement. This alternative to a conventional mortgage is free of Riba, or interest while being competitively priced as well.

Why Refinance Your Home?

A homeowner may choose to refinance their home for several reasons………

Lower Your Monthly Payment

Mortgage refinancing may allow a homeowner 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 homeowner decrease their monthly payment by switching to a lower rate when market conditions are favorable.

Shorten Your Term

Refinancing can allow a homeowner to shorten their contract term.

Generally, rates are higher on a 15-year contract than a 30-year one, all else being equal; this means higher monthly payments, so many home buyers initially choose a 30-year contract when purchasing their home. But when rates drop, the homeowner may find that a shorter contract is now affordable.

Refinancing to a shorter contract can lead to big savings in the long run, because the homeowner will pay less in interest or — in the case of Islamic home financing — profit payments. In addition, the homeowner will enjoy all of the benefits of a fully paid-off home years earlier.

Align With Your Faith

For customers concerned with upholding the principles of their Islamic faith, 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 alternative offered through Guidance Residential and a conventional mortgage is the foundation of the contract. Islamic home financing is a partnership rather than a loan, so there is no debtor or creditor.

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 model, Guidance Residential and the homeowner purchase the home together as partners. Learn more about the differences between an Islamic mortgage and a conventional mortgage.

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

The first step for a homeowner interested in refinancing is to fill out an application providing Guidance Residential with basic information so that they can find out how much funding they may qualify for.

They can start with a quick Pre-Qualification if they would like to obtain a rough estimate of financing that may be available. But they can also choose to skip that optional step and move directly to a Pre-Approval Application. During the application process, the refinance customer will be required to provide financial documentation to verify the 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.

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

*Origination fee is waived for 15-year contracts. Both existing Guidance Residential customers and new to Guidance customers are eligible for this offer. Promotion cannot be combined with any other offer, discount, pricing exception, or Special Program. Applications must be submitted between January 1, 2021, and March 31, 2021. Contracts must close by June 30, 2021. Only available on approved/closed contracts. Other restrictions may apply. Refinance options may not be available for some Texas contracts. Contact us for additional information. Excludes customers who have financed with Guidance within the last 120 days.*