Know your Islamic financing and funds

Islamic funds and financing information are for those who wants to purchase a property based on the Shariah principles. Islamic property financing are sometimes referred to in general as House Financing-i.

House Financing-i is widely known my the Malaysian community as the Shariah principle-based home financing. Islamic financing is finances all types of Property including landed and non-landed. The better part of Islamic financing comes when it supports also refinancing other facilities such as home loans or other schemes (taken from conventional home loans).

The House Financing-i Process:

1. Preliminary steps are pretty much the same. The difference in process comes only when you’ve attained your S&P (Sales and Purchase Agreement). See House Loan Repayment.
2. Approach any Islamic banking institution to acquire Islamic financing approval. Again, the same process of a conventional home loan eligibility applies.
3. After the Islamic banking institution approves your application, your property will be purchased under PPA (Property Purchase Agreement)* and your developer will be paid according to the price.
4. Later after, the Islamic banking institution will actually sell the property back to you through PPA.
5. Then you start paying the Islamic banking institution.

Property Purchase Agreement (PPA)

PPA is agreement by you and the financing institution stating you already have the rights to that particular property you’re in, based on the S&P of you and the developer; while the Islamic financing institution is purchasing those rights to provide you financing for the property you’re buying.

Later after, the house is sold back to you by the Islamic banking institution through the PPA you signed at an agreed price which includes a profit margin (to the Islamic banking institution), for providing you financing for the property. The property name will be changed to the Islamic financial institution, and payment will be on a deferred basis by installment on an agreed repayment price.

The repayment will be calculated based on
[ Purchase Price ] + [ Profit Margin ] = Selling price.

For Properties under construction, the selling price will also include the grace period (construction period). You will pay the Islamic banking institution during the construction period; a monthly fixed amount, upon the first draw down to the developer, until the property is complete or when the Islamic banking institution put a stop.

Documents Required for i-Financing

It’s almost alike any conventional home loan acquisition: You’d require this set of standard home loan documents but here’s a list of what you’d probably need for your the Islamic financing application form:

1.A photocopy of NRIC or passport.
2. For a salary earner – salary slip (latest 3 months) & J or EA Form (latest 3 years)
3. For a businessman or self-employed – latest financial statements, bank statements (latest 3 months), J Form (latest 2 years) and business registration and other supporting documents to support the income
4. A photocopy of the Title Deed (if applicable), Sale & Purchase Agreement, deposit or booking receipt/Letter of Offer from the housing developer
5. Valuation report for a completed property. Some Islamic banking institutions may, however, require additional supporting documents.

>> Read more about Common Fees and Charges for Home Loan Applications
>> Read more about MRTA – Mortgage Reducing Term Assurance

The mortgage and financial consulting services are offered to you FREE of charge without any obligations. Kindly contact us or email to consultant@malaysialoan.com.my if you need any enquiry. Thank You.

About the author

Malaysia Loan

Leave a Comment

Please note: comment moderation is enabled and may delay your comment. There is no need to resubmit your comment.

Error, no Ad ID set! Check your syntax!

Calculator

Loan Calculator Mortgage Calculator
MortgageLoan

R

%

years

%