Islamic home financing and choosing variable versus fixed rates

Although choosing to use islamic mortgage loans means you will stay Sharia compliant and away from riba, there are some other ideas you’ll need to look at to make sure you understand how the mortgage industry works. While many features with islamic mortgage loans are different than more traditional Western mortgages, there are some things that are the same and getting to understand the difference between variable and fixed mortgage rates is a good idea.

Fixed Rates

These are generally more popular with first-time homebuyers for the simple reason that, as the name suggests, the rate doesn’t change over the term you signed on for. People starting out with their first home are juggling new finances and having a mortgage payment that stays the same over a number of years is an added bonus.

Variable Rates

These are for more adventuresome folks. Variable rates move up and down with the markets so theoretically you can pay off more of the principle on the loan. However, even when you’re dealing with Islamic home financing and variable rates, you need to be aware of the fact the amount you pay monthly can go up or down even though you’re knocking down the principle more quickly with low rates.