RIBA (Mortgage)

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SBM
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RIBA (Mortgage)

#1

Unread post by SBM » Tue Jan 31, 2006 4:45 pm

This topic refers to people owning houses in USA.
Every Majlis Aamil will ask key bhai tame riba ma to nathi. All they have to do is go on County Court Records which are public information and check against everyone's name .
I have to been 2 or 3 different Jamaats in USA where I know people who are secretary, treasurer and other committee members who are lying and telling they are free from RIBA or Mortgage and they are still listed in public records as having mortagage on their houses. They also take Qarde Hasana and deposit that money to earn intrest from Banks.
ANYONE FROM AMERICAN KOTHAR READING THIS CAN SEND A MEMO TO ALL AAMILS TO CHECK PUBLIC RECORD and find out how many liers they have in their jamaat

Aleem
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Re: RIBA (Mortgage)

#2

Unread post by Aleem » Wed Feb 01, 2006 4:30 am

Omabharti,

Firstly, It IS possible to have a mortage and not pay any interest. It is common for many people to keep holding onto a mortgage but pay it down to zero so that no interest is paid. This just allows for easier facilitation for carrying on a "zero loan" which can be used for other purchases/ investments.

Secondly, as you point out - many people have Riba. In this day and age in many western countries it is difficult to survive without mortgage payments unless you are fortunate enough to have buckets of money at your disposal.

A mortage is not like an interest payment during the time of pre-islamic tribal arabia. It is a calculated 'service charge' which can be considered a way of life and can help secure an investment.

Are we not encouraged to 'live in today's world' by all the khotari amils? If thats the case - then (fortunately or unfortunately) a mortgae is a big part of it.

Danish
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Re: RIBA (Mortgage)

#3

Unread post by Danish » Fri Feb 03, 2006 3:48 am

Originally posted by Aleem:
Omabharti,

Firstly, It IS possible to have a mortage and not pay any interest. It is common for many people to keep holding onto a mortgage but pay it down to zero so that no interest is paid.
Please explain how mortgage is possible without paying any interest, at least here in America? And what does "holding onto a mortgage but pay it down to zero" mean? Thanks.

Aleem
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Re: RIBA (Mortgage)

#4

Unread post by Aleem » Fri Feb 03, 2006 5:05 am

Danish,

It's quite straight forward.

You can open a mortgage loan account but pay off all the value of the loan so that effectively the amount due to be re-payed into the loan is "zero".

The more you repay your loan, the amount of interest paid is reduced - so by paying it all off you effecitvely dont pay any interest.

However, by keeping the mortgage-loan account active , despite the fact it is fully paid off, you can use the same loan account to purchase new properties or investments without having to go through all the stamp duties and other charges for opening a brand new mortgage.

I believe this should be possible in America. It probably has more to do with the products and services the lending facility can offer.

A little strayed from the topic at hand, but I hope this makes sense

Aleem
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Re: RIBA (Mortgage)

#5

Unread post by Aleem » Fri Feb 03, 2006 6:18 am

Danish,

Further to my previous post, granted that this is not a very common approach to a mortgage. The vast majority of mortgae holders no doubt are paying off loan installments while incurring interest charges.

accountability
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Re: RIBA (Mortgage)

#6

Unread post by accountability » Fri Feb 03, 2006 7:05 pm

From Wikipedia, the free encyclopedia
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Riba is the (Arabic: ربا ) term for interest, the charging of which is forbidden by the Qur'an. For example, Sura Ar-Rum (30:39) states:And that which you give in gift (loan) (to others), in order that it may increase (your wealth by expecting to get a better one in return) from other people’s property, has no increase with Allâh; but that which you give in Zakât (sadaqa - charity etc.) seeking Allâh’s Countenance, then those, they shall have manifold increase.
And Sura An-Nisa(4:161):

That they took riba (usury), through they were forbidden and that they devoured men’s substance wrongfully – We have prepared for those among men who reject faith a grievous punishment.
The above text in quran do not elobrate what actually is riba. As usual the punishment for the disobedience is severe and grevious. In seventh century arabia, there were loan sharks, who would give loan on exorbitant intrest rates, and keep on compounding on one pretext or another. The loan sharks were not usually arabs, but jews and asyrians. To free the mainstream arabs and bedouines from these, islam came up with this soloution of ultimate no intrest. That was a very good idea in 7th century arabia, or was a good idea in rural india and pakistan, when poor peasants were blackmailed by the unsrupulous lenders (commonly known as bania). but modern day banking does not come any close to this definition of riba. actually the intrest accured on the accounts hardly compensates the inflation. Lending banks charge nominal intrest on advances, which includes the service charges etc, intrest rate will be considered zero after inflation adjustments. The quranic version of riba is for individual lenders (loan sharks). The wealth as such do not multiply or the increment is nominal. on the other hand the institutional lenders create big business oppurtunities, finance small business, facilitate daily life, all that without jeopardizing the individual liberties. In default they do not send muscle men to one's home, and grab whatever they can come up with.

our community's love affair for sharia is more to control individuals then for the welfare of the ordinary being. people on this board, I believe is versed with the history of this riba episode, when they tried to take over the dawoodi bohra mercantile bank, and their attempt failed, they suddenly realized that riba is haram in islam, forbiding all and sundry from any contact with any bank, people's livelihoods destroyed. yet dawant is renting out properties to banks in india and pakistan. no one asks (or dare ask) if riba is haram, then sharing the riba income is also haram.Having said that I do believe that the qardan hasna (though it do not conform to the real term hasna) is a good idea.

Danish
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Re: RIBA (Mortgage)

#7

Unread post by Danish » Sat Feb 04, 2006 7:59 pm

Hello Aleem,

All mortgage loan carry an interest rate and there is no such thing as having a mortgage loan with no interest. How much “extraâ€

Aleem
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Re: RIBA (Mortgage)

#8

Unread post by Aleem » Sun Feb 05, 2006 12:22 pm

[quote]Originally posted by Danish:
Hello Aleem,

Regardless of how much “extraâ€

porus
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Re: RIBA (Mortgage)

#9

Unread post by porus » Sun Feb 05, 2006 1:12 pm

Aleem,

Say I want to a buy a house and need $100,000. I go to abank and I ask for a mortgage. How do I avoid paying interest if the term is 25 years.

I know of an easy way to avoid paying interest. I let them calculate a "fixed rate" fee, which works is the same as the calculation of interest (amortization)and determine a sum of monthly payment. I might end up paying, say, $300,000, in this way over the 25 year terms.

I would then say, it is not interest, it is a fee.

Most Muslim Banks operate in this fashion. They change the name of interest to profit or fee etc.

If you really know another way of avoiding interest, please let us know. I would not expect to pay much more than $1000 'fee' for $100,000 mortgage over 25 years.

Please give us step by step instructions. Your previous posts are not at all clear.

anajmi
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Re: RIBA (Mortgage)

#10

Unread post by anajmi » Sun Feb 05, 2006 4:39 pm

This is an interesting topic. I agree with porus in that I shouldn't be paying more than $1000 on a loan of $100,000 over a 25 year term.

This is my take on this. Let us assume that 1kg of gold is worth $100,000 today. If I were to buy a house for $300,000 then I would go to a bank and ask them for a loan of 3kgs of gold. I would pay a fee of $3000 upfront.

25 years later I return the 3 kgs of gold (a kilo every 8 years or however else). Now obviously this 3kgs of gold will probably cost me more than $300,000 say $350,000. But that would definitely not be interest. Cause who knows, the value of gold may actually go down too.

That is what I think Islamic banking should be based on.

Danish
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Re: RIBA (Mortgage)

#11

Unread post by Danish » Sun Feb 05, 2006 7:32 pm

Originally posted by Aleem:
It IS possible to pay off the principal amount totally, but still keep the mortgage account active. In this case, no interest is occured because the 'loan' amount itself is totally paid back.
There is no such thing, for the simple reason mentioned earlier that every loan carries an interest regardless of the “principal amountâ€

observer
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Re: RIBA (Mortgage)

#12

Unread post by observer » Sun Feb 05, 2006 10:46 pm

It is not possible to pay off the principal on a mortgage first and interest later. The payment of interest in a mortgage is blended with teh principal payment. The payment every month contains a certain component for interest and principal.

It is also compunded semi-annually compared to a loan where the interest is compunded monthly.

As you make payments on your mortagage, intially most of your payment goes towards interest. As you get closer to the end of the amortization period (25 years) more of your payment goes towards principal.

Another point: although your amortization is 25 years the term of your loan is usually 5 years when you have to go to your bank and renew it and a new interest is set.

Aleem
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Re: RIBA (Mortgage)

#13

Unread post by Aleem » Mon Feb 06, 2006 5:18 am

Danish,

Maybe it has something to do with the bank and what it allows. The reason I say what I say - personal anecdote:

I have a mortgae - 30 years, and each month was payin x% interest ontop of mortgage payments.

Some months ago I actually paid of the loan totally - 23 years prior to the real deadline, therefore I obviously have not paid interest because I no longer owe the bank anything. In the last few months since paying off the load - I have not been charged interest.

The mortgage account is still 'active' as I have not closed it as yet.

Maybe my example is different from yours, or different to the laws and regulations in your country or at your bank?

porus
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Re: RIBA (Mortgage)

#14

Unread post by porus » Mon Feb 06, 2006 2:59 pm

Aleem,

My advice to you is to desist from further posts on this thread as I do not think you know what you are talking about.

anajmi,

I do not think any Muslim bank will give you 10kg of gold to keep for 30 years for a nominal fee (say, 1% of current price).

However, this would work if there was no inflation, a utopia yet to be achieved, Muslim or otherwise

anajmi
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Re: RIBA (Mortgage)

#15

Unread post by anajmi » Mon Feb 06, 2006 3:31 pm

porus,

You need to read my post again. I have taken inflation into consideration. The total cost of the loan at the end is $350,000 + $3000 fee.

So $50,000 was the inflation.

porus
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Re: RIBA (Mortgage)

#16

Unread post by porus » Mon Feb 06, 2006 7:17 pm

anajmi,

Do you think that there is a relationship between interest and inflation?

Average Bohra
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Re: RIBA (Mortgage)

#17

Unread post by Average Bohra » Mon Feb 06, 2006 8:11 pm

Based on the ridiculous nature of the posts on this thread, it is no wonder that you get duped into thinking that there is such a thing as a “no interestâ€

anajmi
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Re: RIBA (Mortgage)

#18

Unread post by anajmi » Mon Feb 06, 2006 11:42 pm

porus,

Yes there is a relationship between inflation and interest. A certain portion of interest goes towards mitigating inflation.