The Mortgage Lenders From Halal
According to a Case Study: Islamic mortgages interest-based mortgages do not comply with Sharia law.
In the eyes of Islamic scholars, interest is an excess payment from one party to another which is unrelated to the value of the goods traded.
Mortgage interest is therefore unacceptable because one party gains at the other’s expense without any regard to the price paid for the home.
Just what does an Islamic mortgage look like? How is it different from mortgages assumed by the rest of Britons? In simple terms
- In an interest-based mortgage, the lender provides a sum of money to the home purchaser with which to purchase the home. The home purchaser repays the lender with interest over a period of time, say 30 years.
- In an Islamic mortgage, the “lender” and “customer” partner together to buy a home with the “lender” paying most of the cost. The “customer” occupies the home and, over a period of time, makes payments to their partner. These payments server two purposes. First, a portion of the payments over time are a buy-out of the “lender’s” share. Second, the payments include rent to the “lender” for use of the property by the “customer”.
According to the BBC article,
Just as with an interest mortgage, the couple move in and begin paying instalments to the lender to slowly buy the home over many years.
But the difference is they also pay a rent to the lender who has effectively become their landlord.
In Islamic terms, the rent is not another name for interest: It is seen as a fair payment for use of the property rather than a charge for borrowing money.
Rent, interest. Fair payment for property, fair payment for money. It all seems like semantics to me. The BBC article indicates that in Britain, at least, the Islamic mortgage is actually more costly for the “customer” than a traditional mortgage would be for the “borrower”. You can’t put a price on halal.
Yes, you can’t put a price on halal, and neither can Minnesota. According to Minn. State Agency Offers Islamic Mortgages Minnesota is offering the New Markets Mortgage Program for Islamic buyers. These mortgages work a little differently from those described above.
The state buys a home and resells it to the buyer at a higher price. The down payment and monthly installments are agreed to up front at current mortgage rates.
The deal is identical to a thirty-year fixed-rate loan, except there’s no additional interest, because the higher up front price factors in payments that would have been made over the life of a traditional mortgage.
I think this passage could have been clearer. If I understand it correctly, the home is purchased by the state and re-sold at a much higher price with something like a 30-year 0% interest mortgage.
This all seems like semantics to me, regardless of the opinions offered by Sharia scholars.