Sharia compliant home financing?

I never seen an advertisement for this before.

[atsimg]http://files.abovetopsecret.com/images/member/fda2ebbc27a0.png[/atsimg]

Have you?

You changed the title to include 'Sharia' and still no hits, huh? Maybe if you made the picture large enough so we could read what it says...

reply to post by Misoir


No, I must admit I haven't. I did a quick search and found a lot of info on the subject though..

USA Today gave a brief explanation of what "Sharia-Compliant" means:

An Islamic mortgage, for instance, looks like a lease-to-own deal. The bank, not the borrower, buys the house. The borrower makes installment payments to the bank for a period of years, at the end of which he or she gets the title to the house.

The bank's profit technically comes from renting the house, not lending the money. Loundy notes that Islamic mortgages are more costly than traditional mortgages because they involve paperwork for two home sales: the first by the bank, the second by the borrower after the installment payments are finished.

BBC.co.uk gives a few more details:

The basic difference between a Sharia-compliant mortgage and a conventional mortgage is the relationship between the buyer and the lender.

Akmal Hanuk, chief executive of the Cardiff-based Islamic Banking & Finance Centre, explains: "In an Islamic finance home loan, you normally have a partnership together, and this is based on a no-interest basis.

"The second important aspect is that all the conditions, the rights and obligations are spelt out upfront. There are no hidden charges, there is no small print. Everything is absolutely upfront - an agreement is reached right at the time of signing the contract."

At the moment there are three kinds of Sharia-compliant home financing products in the market:

•Ijara - Where the buyer essentially rents a property monthly from the lender and also pays agreed monthly repayments. Once the purchase price is paid in full the property is transferred to the borrower.

•The diminishing Musharaka - Where the buyer enters into a shared partnership with the lender in which both jointly buy the property. The money paid back by the buyer consists of a capital payment plus rent which every month increases the buyer's share.

•Murahaba - Where the buyer is required to finance a percentage (typically up to 20 per cent) of the property upfront. Repayments are agreed and fixed for the term of the mortgage - a maximum of 15 years. The loan can be repaid in full at any point without penalty. The house immediately belongs to the buyer.

Interesting subject