(RNS) A report for Canada’s national housing agency says Shariah-compliant mortgages would pose no legal problems.
Neither would other Islamic financial products, states the 88-page study, done for the Canada Mortgage and Housing Corp.
“Islamic financial products should not present any particular difficulties under Canadian accounting standards,” says the study by the Canadian law firm Gowling, Lafleur Henderson LLP, released in late January.
No chartered banks currently offer Islamic mortgages. The report says there would be no legal obstacles if private entities offered the financial services to Canada’s Muslim community, believed to number at least 700,000.
Because Shariah forbids interest of any kind, Islamic mortgages work by having the lender either buy the home or become an equity partner in its purchase. The homeowner then pays monthly “rent” along with principal payments based on competitive rates.
Beliefnet
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posted February 12, 2010 at 1:46 pm
What is an Islamic mortgage? What on earth does that mean, are there Christian mortgages and Jewish mortgages or Buddhist mortgages?
posted February 12, 2010 at 7:42 pm
They have a different set of rules, cknuck. Last paragraph explains it…one rule is…no interest is charged.
posted February 12, 2010 at 8:13 pm
Oh, cknuck…Christians do charge interest as do probably most everyone else, Jews and others. I wouldn’t mind having a Islamic mortgage…but since I am not “of the faith” I doubt they’d lend to me…but it might be worth a try.
posted February 12, 2010 at 8:45 pm
It’s one of the more benign aspects of Islam, cknuck. Along with charity and probably a few others.
But of course businesses aren’t going to let people use their money for free very often, so they find ways around it that are in many ways equivalent to interest.
posted February 13, 2010 at 12:58 am
One more place where me might learn something if we sit quietly long enough to listen.
posted February 13, 2010 at 5:38 pm
jest I still don’t know what it is or means.
pagan quote, “They have a different set of rules, cknuck. Last paragraph explains it…one rule is…no interest is charged.”
I read that also but I also read “competitive rates.” They may have restructured how they make money, but I’d be willing to bet they still make money.
posted February 15, 2010 at 10:28 am
At first blush it would seem they get around the prohibition against interest by simply renaming it ‘rent’. I think the key difference is:
“the lender either buy the home or become an equity partner in its purchase”
The way mortgages generally work, the individual buys and owns the home, but owes money to the lender, with the house acting as collateral. At any time, if the owner can’t make payments, the entire house is forfeited to the lender.
Muslims are to avoid borrowing money, and so they purchase the house as partners with the ‘financing agency’ (I can’t call it a bank or a lender here), both having equity in the property. It is an entirely different legal arrangement. It seems the agency shares more risk in the muslim model.
I do wish this article had more details. I attached a URL to an Islamic financing agency at the top of my post.
posted February 15, 2010 at 10:30 am
OK, the URL didn’t go through. Here it is again:
https://www.lariba.com/knowledge-center/faqs.htm
as well as a story about these mortgages on Public Radio:
http://marketplace.publicradio.org/display/web/2008/03/07/meaw_money_muslim_mortgages/
posted February 15, 2010 at 11:12 pm
Thanks WT, it is still a bit of a mystery interesting flow of money but they have made it a workable model.
posted March 31, 2010 at 12:22 pm
Islamic Finance does not prohibit anyone from making money. It is against explotiation.There are a couple of essential principles involved. You are allowed to jack up the price, if you are being paid in installments. For example in case of car leasing, if the price of car is say $5000, you can charge five monthly installments of $1100 or any amount. There is no bar on profitablility. However, if the payment of $1100 is due on 10th of every month, and for any reason, the person fails to pay on time and pays say on the 20th of that month, you cannot charge more, such as additional interest or a panelty. Secondly, there should be an asset involved for example a car, stock or real estate. You cannot lend money to refinance someone’s credit card bill or even pay for a utility bill.
If anyone wants to discuss this further, send me an email to tzone66@yahoo.com and I will be happy to address your questions.