Here’s How A Contract Rider Works With Ijara Sharia Compliant Loans

People want to know how an Ijara loan is similar to a more traditional one and we start by discussing the contract rider with them. Making sure our clients have a good understanding of the sharia compliant products we offer is a priority. It’s important to our customers to understand what’s similar and what’s different between the two types of loans.

Sharia Compliant Model

First off, we tell people that an Ijara contract is comparable to a more traditional lease in one big way. With this sharia compliant model, the contract rider sets out the relationships clearly. For example the owner of the property leases it to a lessee for a certain amount of time for a fee. These riders are responsible for clearly marking each person’s relationship in the business transaction.

That’s the way it works in more conventional contracts too.

Here are a few of the important details that get laid out in these Ijara documents.

• The length of the arrangement needs to be clearly laid out. For example, a lessee needs to think about how long they want to be involved in this type of arrangement. It’s important to consider how long you plan on living in the property you purchase. If you plan on moving to a bigger house or into a different area after a few years, and adjustable lease works well. If you have no plans to move from the property you buy within an Ijara loan, a fixed lease is better.
• One of these contracts covers a number of other important details. For example the uses for the leased property need to be clearly specified. As well, the consequences for defaulting on payments or delaying them need to be detailed.
• A contract rider for one of these sharia compliant products will also clearly specify who owns the property for the entire period. Of course, that would be the lessor to make sure that the whole transaction is free from riba.

Before you get to the contract stage, there are some other details you’ll need to look after. One of the first things clients should do is put together the required documents.

This is one of the areas where sharia compliant loans and traditional mortgages are similar. If you’re planning on buying your home and you are a salaried employee, you’re going to need to provide proof of your employment.

Two Years’ Worth

Generally, most lenders will want to see two years’ worth of W2 or pay stubs. Several years of tax returns are important if you are a self-employed individual. If you already own rental properties, you’ll need to produce rental agreement documentation.

There is also some paperwork you’ll need to produce if you’re looking to replace an existing mortgage. Of course, our professionals can help you through the process from start to finish. We can also answer all of your questions about everything including what’s involved in a contract rider.

Please get in touch with us today to find out more about these sharia compliant ijara loans.