An Islamic mortgage, semantics to some

An Islamic mortgage, semantics to some

An Islamic mortgage may just be about semantics.
 
Islam religion forbids followers from paying interest in financial matters, which restricts observers of the Muslim rule from taking out a mortgage.
 
In Manitoba, where an estimated 13,000 Muslims live, the provincial-based Assiniboine Credit Union consulted with Islamic scholars to introduce Canada’s first Islamic mortgage earlier this year. Under this financing, a Muslim home purchaser and the credit union each contribute to buying a house and each has ownership in the property. A contract is drafted where the family buys the credit union’s share over an agreed period of time.
 
The Muslim family has exclusive rights to live in the home, and during the contract term pays the credit union a “profit.” The amount is comparable to what a credit union member with a standard mortgage would pay in interest for a best rate mortgage.
 
Though the two sound similar, the difference is important to Islam religious observers.
 
“The main issue is that trade is permissible in Islam but usury or interest isn’t,” said Omar Kalair, founder of Toronto-based UM Financial, Canada’s premier Islamic financial institution. “So how we structure our mortgage is on a trade concept,” which is what Assiniboine Credit Union has done also.
2 Comments
  • DanP 2010-11-03 10:46:00 PM
    It will be interesting to find out how the property taxes are divvied-up. One would think that, with the Credit Union being part owner, they would be responsible for their share of the taxes. This will be interesting to follow when the credit union get's its 1st default mortgage.
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  • Najeeb Sumrani 2010-11-06 4:43:21 AM
    There are several methods to finance the property under Islamic Finance ( or Shariah ) including the concept of Musharikah or Partnership and/ OR on Murahaba basis, Buying on cost plus mark up\9 profit basis ) and then Ijarah or Lease buy back basis. All of these can be applicable, its need to be structured under contractual commitment.
    I can provide more info on the subject, if you need more info, you may contact me and I can assist you in understand the concepts, which are now catcing up around the world as the fastest growing financial discipline, already crossed Trillion dollars !!!
    My email address : mortgageallianceontario@gmail.com
    Cell 647 891 2367
    Regards to all,
    Najeeb
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