Buying a home is a dream for many people. In pursuit of this dream, many people finance their homes through Home Loans or Kredit Pemilikan Rumah (KPR). In Indonesia, two common types of home purchasing plans are Sharia Mortgages (KPR Syariah), which adapts Islamic financing schemes and Conventional Mortgages (KPR Konvensional), the type of mortgage in general. Through this article, LetsMoveIndonesia compiles all the essentials about Sharia Mortgages, what Conventional Mortgages entail, and the advantages of Sharia Mortgages over conventional ones.
What is Sharia Mortgage (KPR Syariah)?
Sharia Mortgages, or KPR Syariah, are a type of housing financing that adheres to the principles of Islamic financing and is compliant with Sharia law. In Sharia Mortgages, the homeowner and the Islamic bank or financial institution collaborate to purchase a home, sharing the risks and profits of ownership. Sharia Mortgages avoid the element of riba (usury), which is considered haram (forbidden) in Islam, and are based on a profit-sharing principle.
Types of Sharia Mortgages in Indonesia
In Indonesia, there are several types of Sharia Mortgages that prospective homebuyers can choose from, including:
- Murabaha: The purchase of a home on a buy-and-sell basis, where the Islamic bank buys the home and then sells it to the homeowner with an agreed-upon profit margin.
- Musyarakah Mutanaqisa: In this arrangement, the Islamic bank and the homeowner become partners in home ownership, and the homeowner gradually acquires the bank’s share in the property until full ownership is achieved.
What are Conventional Mortgages?
Conventional Mortgages from mainstream banks are a common type of home loan in which homeowners borrow money from the bank and repay it with interest. Conventional Mortgages do not share the risks of home ownership with the homeowner.
Advantages of Sharia-Compliant Mortgages over Conventional Mortgages
Sharia Mortgages offer several advantages over Conventional Mortgages:
- Interest-Free: Sharia Mortgages avoid interest, aligning with Islamic law principles. This makes them a suitable choice for individuals seeking home financing that adheres to their religious beliefs.
- Shared Risk: In Sharia Mortgages, the bank and homeowner share the risk of home ownership. This means that in case of losses, the burden is distributed between both parties, fostering a sense of joint responsibility.
- Transparency: Sharia Mortgages are generally more transparent in their agreements and associated costs. Homeowners have a clear understanding of how the bank’s profit is calculated.
- Flexibility: Sharia Mortgages are often more flexible in customizing agreements to suit homeowners’ needs. This may include longer loan tenures or the ability to make early payments without incurring additional charges.
How to Buy a House With Sharia Mortgage (KPR Syariah)
To secure a Sharia Mortgage, prospective homeowners can contact banks offering these services. The process involves approval from the bank and the homeowner concerning a financing structure that complies with Sharia principles.
The Role of Mortgage Advisors in Securing the Best Sharia Mortgages in Indonesia
Mortgage brokers serve as intermediaries who can help prospective homeowners find the best Sharia Mortgage offers in the market. They possess in-depth knowledge of various banking products and can assist you in navigating the process of obtaining a Sharia Mortgage that suits your financial needs and preferences.
Top Banks Offering Sharia Mortgages in Indonesia
Several leading banks in Indonesia offer Sharia Mortgage services, including BNI Syariah, Bank BRI Syariah, Bank BCA Syariah, Bank BSI, and BTN Syariah. Each bank provides different Sharia Mortgage products, so it’s important to compare and choose one that suits your requirements. Here are some of the top Sharia Mortgage providers in Indonesia:
- BNI Syariah: Offers BNI Griya iB Hasanah with Murabaha contracts, flexible requirements, and maximum financing of up to IDR 25 billion with tenures of up to 15 years.
- BRI Syariah: Provides Griya Faedah for various housing needs, including home, apartment, and land purchases, as well as low-income housing financing. The maximum financing limit is IDR 3.5 billion with tenures of up to 15 years.
- BCA Syariah: Offers KPR iB BCA Syariah with various contract options. The program provides tiered margins, financing starting from IDR 100 million, and interest rates from 8.5% per year.
- Bank Syariah Indonesia (BSI): BSI offers four Sharia Mortgage programs: BSI Griya Simuda, BSI Griya Reguler, BSI Griya Mabrur, and BSI Griya Take Over. These programs feature low, fixed instalments, easy payment terms, and no commission, penalty, or appraisal fees.
- BTN Syariah: Provides KPR BTN Platinum iB with fast processing, low down payments, and fixed instalments using Murabaha contracts. It also offers KPR BTN Bersubsidi iB for low-income families in cooperation with the Ministry of Public Works and Housing.
Also read: Top Banks that Partnered with LetsMoveIndonesia for Mortgage
LetsMoveIndonesia as the Premier Mortgage Advisor in Indonesia
LetsMoveIndonesia is one of Indonesia’s leading mortgage advisors with a strong reputation for helping prospective homeowners find the best Mortgage lenders for our clients’ needs. We have a network of connections with various banks and can assist you throughout the Sharia Mortgage acquisition process, from comparing products to completing documentation.
When deciding between Sharia Mortgages and Conventional Mortgages, it is important to consider your values, needs, and financial capacity. Sharia Mortgages provide an alternative in line with Islamic Sharia principles and offer several advantages, making them a wise choice for homebuyers.
Found this article interesting? Then check out our other useful articles about home loan mortgages here!
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