1. How will the Salam Financial model work?
The Salam Financial home purchase model is based on an installment credit sale otherwise known as murabaha, a common form of a contract in Islamic law. This transaction involves the transer of ownership from the seller to the financial institution and then to the buyer, after agreement of mortgage terms including profit factor rate, term and mortgage conditions.
The steps are as follows:
- The Muslim home buyer contacts Salam
Financial to discuss the purchase of a home, ideally before an offer to
purchase is made.
- The home buyer fills out Salam
Financial's pre-approval application which is sent to our financial institution
partner. The documents required for pre-approval include the completed
application, income confirmation (employment letter, T4 slip, pay stubs), and downpayment confirmation (bank statements, RRSP statements or investment statements).
- Once the home of the buyer's choice has been selected and an offer has been accepted, a full approval will be generated, subject to final credit and documentation fulfillment criteria. This may or may not involve an appraisal to verify the value of the property.
- Once the final approval from the financial institution
has been received, all documentation will be forwarded to the lawyer who
will prepare final documents and inform the buyer of the final closing
costs.
- Once all the documentation is prepared, the lawyer's
office will contact the buyer to set up an appointment to arrange for
closing and final payment of the downpayment
and standard closing costs (generally approximately 2% of the home
purchase price including lawyer's fees, land transfer tax, and
registration of the property).
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2. Who do I contact to begin the home finance process?
Salam Financial representatives are ready to assist you. You can contact Salam Financial toll free across Canada and the US at 1.877.451.8788 or by e-mail at info@salamfinancial.com.
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3. Will I be placed on a waiting list to take advantage of the Salam Financial product?
We are currently adding customers to our database to be sure we have your contact information on file when the new product is launched. Please go to our On-line Application page and fill in the brief questionnaire. You will be contacted by a Salam Financial representative once the home financing program is in place.
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4. What will be the features of the new product?
Salam Financial's Islamic Home Financing program will be a competitively priced, low downpayment product. Home buyers will only need a minimum of 5% down (subject to satisfaction of income criteria) to buy a house and the profit factor rate will be competitive to what is available in the conventional market. The amortization periods and financing terms will be flexible to satisfy the diverse array of needs of our valued customers. The product's Shariah compliance will be verified and a fatwa will be available for viewing on our website.
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5. When will the product be launched?
Development of a large-scale, competitive 5% down product requires the input of a number of different experts, from lawyers and finance professionals to real estate, mortgage and Shariah advisory specialists. Salam Financial is committed to providing our customers with the nation's best, most flexible and convenient Islamic home financing alternative and we are confident our customers will be happy with the result. Salam Financial expects to launch the product in the Spring of 2007 insha-Allah. Please do check our website regularly for the latest news and updates.
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6. What will my monthly payments be?
The exact monthly payment will depend on the profit factor rate applicable at the time of your closing. Rest assured that Salam Financial is committed to providing our customers with competitively priced, professionally delivered, Islamic home financing services.
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7. Will I be forced to relinquish some of the protections that I get in conventional home financing if I use a Salam Financial home financing product?
The Salam Financial home financing product is designed to work within the Canadian legal and regulatory framework, including all homeowner and lender protections that the marketplace currently enjoys.
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8. I have an existing mortgage. Will I be able to refinance my mortgage with Salam Financial's home financing program?
Salam Financial's home financing program is currently for use with home purchases only. However, we are well aware of the need for refinancing services and will be developing the refinancing option soon. Please check our website for more information.
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9. What is the difference between this product and a conventional mortgage?
A conventional mortgage is a loan contract with explicit interest, which is not an acceptable financing structure from a Shariah perspective. The structure of the Salam Financial product is an installment credit sale known as murabaha which is a purchase contract.
The Salam Financial structure is one that is commonly used for home financing purposes around the world. Accepted by leading Islamic scholars, it allows for ownership transfer from the seller to the financial institution to the buyer. The key difference between this structure and the conventional mortgage is that in the conventional case, the ownership never transfers to the financial institution. However, in a valid murabaha, the finance company is a party to the transaction.
A fatwa detailing the Shariah-compliance of the product will be available on Salam Financial's website when the program is launched.
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10. Once the transaction closes, whose name will the property be in?
The property will be in the name of the home purchaser.
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11. I am buying a house from a builder. Can I use Salam Financial's home financing services?
Salam Financial will be able to provide financing services on homes purchased from builders. Contact Salam Financial toll free at 1.877.451.8788 for more information. You can also reach us by e-mail at info@salamfinancial.com.
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