##### Property Financing via Al-Bai’ Bithaman Ajil (BBA) Concept

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Property Financing via Al-Bai’ Bithaman Ajil (BBA) Concept
Posted Date: Jul 27, 2009
By: BSN

Searching for a property financing that can suit your needs? Look no further, at Bank Simpanan Nasional (BSN) we are offering a financing with the lowest fixed rate in town. The financing offered is a Shariah compliant under an Al-Bai’ Bithaman Ajil (BBA) concept. What is Al-Bai’ Bithaman Ajil (BBA) concept is all about?

BBA is the only contract that does allow the customer to have an ownership on the asset. It refers to the sale of goods on a deferred payment basis at a price, which includes a profit margin agreed to by both parties. It is a credit sale contract made on a fixed installment. Hence changes in the Base Financing Rate will not allow the Islamic Banking to adjust its profit rate.

A sample calculation of a 20 years property financing is as follows:

Assume that you take out a 20 years financing for a house terrace of RM250,000 at a profit rate of 5.88%. The monthly installments and total repayment would be based on the following formula:

(PMT) = [FA (1 + r)n r] / [1 + (1 + r)n – 1]

Whereby: PMT is payment of monthly installment
FA is facility amount
r is profit rate (per month)
n is periodic payment (no of months)

Monthly installment = [RM225,000 (1 + 0.0049)240 x 0.0049] / [1 + (1 + 0.0049)240 – 1]
= RM1,596.43

Whereas the Bank’s selling price is = RM1,596.43 x 240 months
= RM383,143.20

Given a financial uncertainties in the coming future, it is best to opt for Islamic financing at BSN since the rate is secured against movement in the Base Financing Rate. With 377 branches all over Malaysia, monthly installment payments can be made through the ATM, Cash Deposit Machine and over the counter. And soon we will provide an internet banking to facilitate our customers’ needs.

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