Assume that a potential buyer is interested in purchasing a home worth (US dollars) USD150,000. The buyer approaches an Islamic financial institution for the purchase of the property and puts down 20% of the price (USD30,000). The financial institution provides the other 80% of the price (USD120,000). This agreement results in 20% of the home belonging to the client and the remaining 80% to the financial institution. The next step is to determine the fair rental value for the property based on the estimates of other properties in the same neighbourhood. A fair rental value of USD1,000 per month is determined. As such, the client pays USD 800 as rent for the 80% share of the financial institution at the start of the contract. The two parties then agree on a period of financing of 15 years, that is 180 months (12 × 15 = 180). Based on the rental value and the financing period, the financial institution then determines the fixed monthly payments the client would have to make to own the house by paying the required rental amount each month and an equal monthly amount to repurchase the bank’s share. Prepare an excel spreadsheet of the monthly payments
Assume that a potential buyer is interested in purchasing a home worth (US dollars) USD150,000. The buyer approaches an Islamic financial institution for the purchase of the property and puts down 20% of the price (USD30,000). The financial institution provides the other 80% of the price (USD120,000). This agreement results in 20% of the home belonging to the client and the remaining 80% to the financial institution. The next step is to determine the fair rental value for the property based on the estimates of other properties in the same neighbourhood. A fair rental value of USD1,000 per month is determined. As such, the client pays USD 800 as rent for the 80% share of the financial institution at the start of the contract. The two parties then agree on a period of financing of 15 years, that is 180 months (12 × 15 = 180). Based on the rental value and the financing period, the financial institution then determines the fixed monthly payments the client would have to make to own the house by paying the required rental amount each
month and an equal monthly amount to repurchase the bank’s share. Prepare an
excel spreadsheet of the monthly payments
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