With the steady growth and rising popularity of the Islamic finance industry over the past decade, many consumers still hold on to tightly held misconceptions. Whether due to an unclear understanding of the financing industry in general or because of misinformation spread by others surrounding non-traditional finance methods, potential home buyers many times bypass potential savings and would do well to understand what is and isn’t true. Here, we cover four common misbeliefs and provide a clearer picture of the benefits an Islamic finance provider can offer to those refinancing a home or in the market to purchase one.
Misconception #1: Islamic Finance is for Muslims only.
Truth: Islamic finance is an alternative for conventional financial transactions. Although based upon ethical and social values of the Islamic faith, it shares the same economic objectives as more conventional products. Islamic financing is available to Muslims and non-Muslims and is gaining popularity – large banking groups such as Citigroup and Standard Chartered offer Islamic financial products and services. The market is truly open to everyone.
Misconception #2: Islamic finance is drastically different than conventional mortgage.
Truth: Islamic finance is better explained as taking a different approach to conventional finance. It is asset-based, not currency based. In other words, the rate of return is based on the actual asset or investment and not the “interest” on the money loaned – as interest (or the Islamic legal term “riba”) is not compliant with Islamic principles. The financier, however, may make a profit or return on its investment and may structure its products in a way that closely mirrors more conventional methods.
Misconception #3: Islamic finance is more complicated than traditional mortgage.
Truth: Financing in general can seem complicated to the average consumer – especially consumers that are new to the concepts, terms and practices of the financial industry. However, working with a company that provides support and guidance throughout the process of for instance, financing or refinancing a home, is a simple solution. Guidance Residential, the #1 U.S. Islamic home finance provider, unlike “quick” mortgage loan providers found on the internet, assigns a professional Account Executive to each client. The Account Executive works with each client to answer questions and provide education on all aspects of the financing process. Account Executives are skilled and knowledgeable and understand that clients, especially those purchasing their first home, need a trusted source for one of the largest financial decisions they will make. Whether needing advice over the phone, or wanting a more personal interaction via a face-to-face meeting, Guidance Residential prides itself on customer service. In fact, wonderful and heartfelt testimonials are received daily such as this note from a client to their Account Executive:
“You made the process very easy for us especially as a first home purchase. We panicked a few times, but you remained patient and gave detailed explanations. If there were minor bumps, they were always handled right away. Everyone always told us how hard the mortgage process is but we did not experience any such thing. This is a testament to Guidance, but more so I attribute it to you, your personality, positive and very professional attitude and sincere desire to help us get our first home in the U.S.
Misconception #4: Islamic finance is more expensive than conventional finance.
Truth: In a word, no. Although the Islamic finance industry at the onset operated in a very niche market with less competition, pricing did tend to be higher. However, as the industry became more mainstream, Islamic financial products and services fell in line with the more traditional offerings on the market.
For videos on more Frequently Asked Questions regarding Guidance Residential and Islamic home financing, please visit https://www.guidanceresidential.com/faq.