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A new model for Islamic cooperative mortgage of housing finance

Aslina Nasir (Mathematics Department, Universiti Malaysia Terengganu, Kuala Terengganu, Terengganu, Malaysia)
Lazim Abdullah (Mathematics Department, Universiti Malaysia Terengganu, Kuala Terengganu, Terengganu, Malaysia)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 4 April 2019

Issue publication date: 27 August 2019

Abstract

Purpose

This study aims to propose a new model of Islamic cooperative mortgage of housing finance (ICOM) to provide a lower monthly initial amount with a longer tenure for the low- and middle-income members. This model is developed to ease the burden on borrowers concerning the high initial down payment (ID).

Design/methodology/approach

The ICOM model is a no-interest mortgage and is developed based on the cooperative home mortgage model by Ebrahim (2009). The model is verified using numerical examples to ensure its feasibility to produce lower monthly initial amounts and compared to the cooperative home mortgage.

Findings

From the numerical example, the ICOM model shows a lower monthly initial amount with a longer tenure compared to the cooperative home mortgage. The monthly payment is also lower than the cooperative home mortgage.

Research limitations/implications

The authors compare their model with Ebrahim’s (2009) cooperative home mortgage because of a constraint of limited previous studies on housing finance. Therefore, this model is developed by considering the unaffordability of the initial down payment among low-income borrowers. As this model introduces a lower monthly initial amount, the authors expect it can reduce the unaffordability problem of high initial down payment.

Practical implications

The authors also expect that a lower monthly initial amount with a longer tenure can ease the burden among the low-income borrowers by reducing their consumption on housing.

Originality/value

This paper provides a non-interest Islamic cooperative mortgage and lower monthly initial amount with a longer tenure for the low- and middle-income borrowers.

Keywords

Citation

Nasir, A. and Abdullah, L. (2020), "A new model for Islamic cooperative mortgage of housing finance", International Journal of Housing Markets and Analysis, Vol. 12 No. 4, pp. 708-721. https://doi.org/10.1108/IJHMA-06-2018-0044

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited