A Murabaha transaction involves a purchase and deferred-payment resale. The property that has been identified by you for purchase will be purchased by Devon Bank. At closing, you will assign the purchase contract to Devon Bank, which will enable the Bank to purchase the house from the seller on the same terms and conditions that you had agreed to with the seller. Immediately after the purchase, there will be a second transaction.
At this transaction Devon Bank will sell the house to you for a fixed price, paid over time, with no interest. The fixed price will include the price Devon Bank paid for the house and the Bank’s profit. To determine the profit, Devon Bank will take into consideration the purchase price, the amount of down payment, the term of repayment and the market rate of return on real estate transactions that our investors expect. At closing, you will provide us with the agreed down payment and the balance of the Murabaha debt will be paid in installments as agreed. You will have the title/ownership to the property at closing.
By structuring the transactions in a Shariah compliant manner, we avoid lending you the money and therefore there is no interest involved. Rather than lending you the money to purchase the property of your choice with interest, Devon Bank purchases the property of your choice and sells it to you for a fixed price. At closing, you do not sign a promissory note that states the principal amount and the rate of interest at which the principal will be repaid. Instead, you will be signing a Murabaha contract for the balance amount due on the purchase price of the house.
We have designed our products to avoid private mortgage insurance for those making lower down payments and avoid concerns with its acceptability under the Islamic law. It also gives opportunity to build equity faster.
Financing is available for varying terms with low down payment. Please contact us for more information regarding minimum down payment and terms offered.
From an economic prospective, we have tried to keep Islamic Financing as close to an equivalent conventional loan and to keep any additional costs as low as possible.
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To learn more, click here to visit our Devon Islamic Finance website.