With the new mortgage scheme launched by the Gulf African Bank on Friday, mortgage financing in the country is set to become more competitive.
The Sharia compliant product is structured differently from those offered by other conventional banks in a way that potential house owners are in a joint ownership with the bank.
In the scheme, the bank contributes 70 per cent of the initial cost of the house, which will constitute a similar number of unit shares, while the customer contributes 30 per cent. The customer will then pay an agreed rent monthly for using the bank’s unit share of the property.
“The customer will purchase the bank’s equity over a period of 20 years to fully own the house. The unit payments are constant but are on a reducing balance,” said head of liabilities Walid Khalid.
However, there is an allowance for those who would want a shorter mortgage period.
What this means is that every month, the customer will be expected to buy a unit share from the bank, equal to the amount of rent agreed and which will reduce the rent payable against the balance of the unit shares owned by the bank.
This process is referred to as the Diminishing Musharakah or joint ownership financing.
Potential customers will have to produce 6 months bank statement and three months payslips to qualify.