For municipal tax-exempt funds, taxation may depend on your state of residence and the alternative minimum tax may apply. Where, yeah, it does cater to a certain audience, but if you’re looking at it from a returns perspective or a risk perspective, anybody can use it. AMJAD QUADRI: Absolutely. And I would say the answer to that is no. The ijara contracts that we design uphold all the legal responsibilities of a more conventional mortgage but forgo these interest payments. You feel like, you know, you have more saved up and you’re in a better place. MONEM SALAM: So, you’ve mentioned a lot of things, and I know you’re in the industry so it comes rapid fire to you, but I just want to kinda try to sum up, if I can, what you actually said. MONEM SALAM: Okay. Can you think of any that you’ve come across over the years of doing this? Manzil is the only institution in Canada that has access to open fixed (Murabaha) and variable (Musharaka) rate Halal certified mortgages with payment terms of up to 25 years. Well, Islamic banks have come up with a product called the “Home Purchase Plan” or “HPP”. MONEM SALAM: Alright, so the protections are exactly the same as they would be in a regular mortgage. If you’re looking for an Islamic mortgage, one which is halal (lawful), you can apply for one through a specialist provider. 31 Comments. However, the proposed scheme suggests that instead of making two transactions conditional to each other, there should be an undertaking from the client. Guidance Residential is a similar company providing support to New York City buyers. Haram means forbidden by Islamic law. AMJAD QUADRI: When you’re doing an Islamic mortgage, I think the process of getting the financing, you’re going to find very, very similar to when you’re going for a conventional mortgage. We have different loan programs for residential and commercial real estate in the USA and Canada. And I think everyone is gonna come back to the same place. Because I wanna know if the person that I’m potentially helping to buy a house is reputable. And so happy and fortunate to be able to go through it. MONEM SALAM: Yeah, I think it’s both a matter of awareness and especially in a mortgage contract, a lot of skepticism. That way, you still get the benefit of the increase in property value without the downside of if something happened on the other side, you’re still protected. A company limited by guarantee (No. Because for the companies that are doing things correctly, you know Guidance and UIF specifically, each state they go into, they spend anywhere from $100,000 to about $500,000 on legal fees to make sure that their contracts, which are different than the conventional mortgages, apply and are aligned with the home buying safety guidelines that each state has. Hamid. But for most people, at that time, if they were looking at Islamic finance versus conventional financing, when it first started, Islamic finance was definitely a little bit more expensive. Islam forbids interest-bearing loans, so Muslims may prefer to seek a halal alternative when purchasing a property. No lien, no foreclosure, true partnership model. And I think this, sometimes, confuses people and/or frustrates people because they feel like, you know, if I went to a large banking institution to do this, it would ask me for all of the same stuff. MONEM SALAM: That’s a good explanation. So, we do have a special guest. Bai-bilwafa is a special arrangement for the sale of a house where a buyer promises the seller that whenever the seller repays him/her the price of the house, he/she will resell the house hack to the original seller. 2981339) It’s not only about what you’re paying, but it’s also about, in cases of the downside, the risk part of it. Firstly, a conventional mortgage is a reasonably simple transaction to document legally. And the reason that people would want to stay away from it is because it’s clearly within the top, easily, five or ten sins within our religion. Above are some Islamic mortgage providers and home financing options for Muslims. One may raise an objection that if the promise of resale has been taken before entering into an actual sale, it practically amounts to putting a condition on the sale itself, because the promise is understood to have been entered into between the parties at the time of sale. Investors should consult with a financial adviser prior to making an investment decision. Investing involves risk, including the risk that you could lose money. At the time of the purchase of each unit, sale must be effected by the exchange of an offer and acceptance at that particular date. It leads to uncertainty (Gharar) in the transaction, which is totally prohibited in Shariah. Contact details: 0207 487 6626. If you wish to deal with these companies then please contact them to verify their mortgage systems for Shariah compliance as we cannot guarantee it 100%. There’s actually a misnomer in the community that doing Islamic financing versus going the conventional route will end up costing you more and that has actually been proven not to be correct either. You know, it’s something you wanna stay away from. And when Guidance came to market, I was ending up saving almost 2 percent going with Guidance and to me, I was like, Hallelujah, this is awesome and it’s, you know, something that from start to finish was created by the Islamic scholars. We have, I feel, a very special one. Investing involves risk, including the risk that you could lose money. So, Monem you mentioned this earlier, that it takes a while to get into different states. This question brings up some important issues. There’s an LLC. I’d never heard that before, that that person was able to do that. And he approached one the other guys that we grew up with from our mosque that ended up becoming an Islamic scholar, and said, “Can we come up with a solution for the Islamic community?” His dad was a businessman, did a lot of banking with local Korean banks, so felt like hey maybe this will help. However there are a number of Muslim Jurists who hold the view that promises are enforceable, and the court of law can compel people to fulfill their promise, especially, in the context of commercial activities. A. AMJAD QUADRI: That is a very good way to look at it, yes. There are a range of Islamic mortgage alternatives available, allowing buyers to get on the property ladder while being sharia-compliant. Leave new. And this is a money-on-money transaction where there’s no effort put into it or there’s no assets that actually are backing the financing. In an Islamic co-ownership contract which is one of the allowed contracts for home financing, then your co-owner takes that loss because at that point, you are having to stop this contract out of hardship and not something that you’re doing just purposely just because you decided, hey, you didn’t like the house. There are financial institutions in the US that do offer Islamic housing financing. Islamic Mortgage Our Islamic Mortgage is a banking solution offered to qualified members, based on a shared ownership concept called 'musharaka' (partnership). September 1, 2015 11:28 pm. United Kingdom, Registered charity no. So, I think that story is very interesting in how it happened, how someone was at the right place. MONEM SALAM: And it is complicated. Islamic or halal home purchase plans are popular because borrowing and lending money in exchange for interest is forbidden under Sharia law. And the fact that now this person is getting the blessings of all of these people being able to avoid something that you know, within our religion is something that people don’t want to get anywhere near. CHRISTOPHER PATTON: Are there trade-offs with some of these… I’m gonna say friendlier rules and guidelines here, like the late fees not compounding and kinda looking out for people if they’re in trouble. AMJAD QUADRI: Absolutely, yes. MONEM SALAM: So, are you basically saying that if I wanted to start up a conventional mortgage-lending, I could easily just download a contract, take it to the state and start operating within a short amount of time? Investing in foreign securities involves risks not typically associated directly with investing in US securities. MONEM SALAM: Yeah, it’s one of those things where they have to get approval from each of the different states, as far as the contract is concerned. 11390908 MONEM SALAM: Welcome to the audience for joining us on this show. MONEM SALAM: That’s what I was thinking about, too. But this was more a rukhṣa (permission/alleviation), The risks of foreign investing are generally magnified in the smaller and more volatile securities markets of the developing world. These and other risks pertaining to specific funds are discussed in each fund's prospectus and summary prospectus. Our Islamic financing is riba-free, and it is accepted by independent Islamic scholars as completely halal. In this manner, then, the transaction described in the second part of the question will be perfectly halal. Hopefully we’ll get rid of a lot of myths that a lot of people have about Islamic mortgages. The Amana Funds restrict investments to those companies consistent with Islamic and sustainable principles, which limits opportunities and may affect performance. which means it was a stipulation given at a time of need and that it might not apply anymore. these contracts, even though they’re not a conventional mortgage, do comply with all of the state home protection laws and these guys can do business in this state. Luckily for British Muslims, banks are gradually recognising that this is a problem for a large number of people, and are therefore offering an alternative, by way of Islamic Mortgages and other forms of finance tailored towards Muslims. Tel: 415 8560440. The reason for that is because they were new, they had more overhead. MONEM SALAM: It’s a different model but like I said, a lot of times, when we talk about Islamic investing, it’s not only about the return, it’s about risk mitigation. Our institute is dedicated to the promotion of Islamic Banking, we are involved in publications and offer training and research programs. It takes place between two compentent parties, there is an offer and its acceptance, the object of the sale (a home) is itself halal, and the purchase price is paid by halal means, or cash. With the Islamic finance contracts, you know, there is no multiplying late fees. A. It won’t be the most expensive and it won’t be the least expensive. Halal mortgages currently come in two forms, the Murabuha and the Ijara. MONEM SALAM: Amjad, well, welcome to the show. It is clear from the previous three points that each of the transactions mentioned above are allowed per se, but the question is whether this transaction maybe combined in a single arrangement. AMJAD QUADRI: I think the main reason for someone not to want a traditional mortgage that is of the Islamic faith is to stay away from what’s called Riba. Nothing on this website should be considered a solicitation to buy, an offer to sell, or a recommendation for any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful. • Even though deferment is not considered real currency, in murabaha, there is an increase in price for deferment. When interest rates rise, bond prices fall. However, if the first sale is effected without any condition, but alter effecting the sale, the buyer promises to resell the house whenever the seller offers him the same price. DISCLOSURES (read by Christopher Patton): Please consider an investment's objectives, risks, charges and expenses carefully before investing. We’re not gonna share in the profits because our original contract says that you’re just paying us off X amount, and so at the time of sale, you just buy us off as a partner and then you own it completely and you sell it for what you want. AMJAD QUADRI: Yeah, I think one is that Islamic finance is harder than conventional financing. While the caution on the part of the questioner is to be admired, it must be understood that a Muslim is responsible for ensuring that his or her transactions are halal. Are there trade-offs elsewhere that you find kinda make up for that? Institute of Islamic Banking and Insurance Alperton Lane, Greenford UB6 8AA Stock prices fluctuate, sometimes quickly and significantly, for a broad range of reasons that may affect individual companies, industries, or sectors. The most that the person whom the promise has been made to can do is to compel those undertaking the promise, through the courts of law, to fulfil that promise. AMJAD QUADRI: I’d say Islamic home financing falls right in line with what’s in the market. It helps people get into a house and you know, feel like they’re not in debt. MONEM SALAM: Okay, the source of money is coming from Freddie and Fannie, which are not halal. At Ijara Community Development Corp. in Ann Arbor, MI, we offer various Islamic financing alternatives for your needs. Your payments are more in line with what you’d like it to be. Because they add states slowly, based on the Muslim population and return on investment. My credit score, my W-2, how much income, how much do I have saved. They are mandated government institutions that are supposed to help Americans buy homes. And if you have to sell it for less than what your house is actually worth, or less than what your house is actually worth or less than what you still owed, then they won’t come after you for a difference because if you are in a Musharakah contract, which means you’re a co-ownership contract, basically your co-owner decided to take the loss with you and it’s not gonna go on your credit that you have an outstanding balance or things along those lines. Again, there is a difference of opinion if it is to be sold to a third party. MONEM SALAM: Yeah bad news always spreads faster than good news. Thank you very much for your e-mail. This podcast is prepared based on information Saturna Capital deems reliable; however, Saturna Capital does not warrant the accuracy or completeness of the information. To obtain this and other important information about the Amana Funds in a current prospectus or summary prospectus, please visit www.amanafunds.com or call toll free 1-800-728-8762. It is also permissible that a particular price is agreed in the promise of purchase signed by the client. I’m paying the same amount. Essentially, then, the world will be free of the Haram only when people stop doing wrong, and that is impossible. Halal & Ethical Screening. Faith-Based Financing Faith Based Financing FAQs Murabaha Shariah Board Approval Heter Iska Stay Connected Islamic Financing Devon Bank has been offering Islamic Financing designed to avoid conventional interest common in traditional loans since 2003 for home purchases and refinancing from traditional loans. Distributor: Saturna Brokerage Services, Member FINRA / SIPC. He was actually born and raised in Chicago, lives there currently as well. This makes the transaction of sale contingent upon a future event that may or may not occur. Please read the prospectus or summary prospectus carefully before investing. So Amjad, I wanna play a game of rapid fire with you. Afifi says the payments are comparable to a mortgage payment—part of it going towards ownership and part of it paying the rent. New York 10022 This is not a trivial business practice - the Prophet Muhammad is said to have cursed the consumer of interest, the one who pays it to others, the witnesses to such a contract, and the one who records it in writing. Login Login Banking securely Register for new mobile banking app. My 1099 says INT on there. Is that correct? And what I think people sometimes don’t think about is if they reversed the position and they were the person that had a lot of money. The first thing I wanna know is their credit score. The same applies to anything stolen. Transactions involved in Diminishing Musharaka. CHRISTOPHER PATTON: Welcome to Halal Money Matters, presented by Saturna Capital. The bank would allow you to use any funds you can prove are yours and acquired through legitimate means, so yes, you can use money in your Help to Save scheme towards halal, mortgage alternative Home Purchase Plan. So, I got into Islamic finance 16 years ago, now. There’s a lot of misperception and things out there. Similar to what we found with Islamic investing, right? So, if you take all three of those, then in the majority of the states we live in, that fatwa no longer applies. And I refinanced. The proposed arrangement is based on the following transactions: The first step is to create a joint ownership in the property. Correct? Conversely, if the sale is without any condition, but one of the two parties has promised to do something separately, then the sale cannot be held to be contingent or conditional upon fulfilment of the promise made. *Manzil mortgages brokered by Stanford & Chase Capital Corp. Or is it just, across-the-board, a different mindset. Halal means lawful or allowed in Islamic law. Under the Sharia law of Islam, the payment or receipt of riba (also known as interest) is prohibited, and thus a conventional mortgage that charges interest each month cannot be utilized by a … Versatile Islamic mortgage choices . A halal mortgage doesn’t seem very halal and I’ve heard its quite controversial – but my research in that is lacking,” said 36-year-old, Shoohada Khanom. But so far as the property is leased to the partner himself, all of them are unanimous on the validity of this Tjarah leasing transaction that eventually results in full ownership. AMJAD QUADRI: Even though Freddie Mac has or Fannie Mae, has recognized this as a different contract than the states use a different contract, the IRS has not caught up yet. And also something that is very rare, where God says you know, anyone that is either accepting, like if they give someone a loan and they’re accepting more money in its place as interest or Riba, or if someone is paying it, you know, they’re essentially in war with God. Preliminary Question 1: What is an Islamic mortgage / halal mortgage? In the case mentioned in the question, a part of the cash payment advanced by the questioner would undoubtedly be used by the seller to pay off a mortgage. And you know, if you did it conventionally then Islamically you’d be like, “Oh yeah, okay, it was about the same,” but if you haven’t, and if you’re buying either conventionally or buying it through an Islamic process, you’re just gonna be like, “Wow, this is hard! Thank you very much for your enquiry. The three problems with Islamic mortgages, you have mentioned are exactly the questions. And this person has now opened it up for multiple hundreds of homes to be closed on a monthly basis through Islamic finance for a lot of people that probably would not buy a house. The answer is that if these transactions have been combined by making each one of them a condition to the other, then the Shariah does not permit this. There is no objection from Islamic scholars against structuring this transaction. And I realized that hey, let’s see if there’s another solution. Tel 1 212 9068500 I think what we have today will be able to explain that a little bit more. The share of the financier is further divided into a number of units. A Islamic banks can participate in home financing on the basis of diminishing Musharakah. CHRISTOPHER PATTON: Do you feel like there’s an awareness that this is even possible? Share Flipboard Email Print CEphoto, Uwe Aranas/Wikimedia Commons/Photo by CEphoto, Uwe Aranas / CC-BY-SA-3.0 Islam. Imam Abu Hanifa and Imam Zufar are of the view that the undivided share cannot be leased out to a third party, while Imam Malik and Imam ShafiT, Abu Yusuf and Muhammad Ibn Hassan hold that the undivided share can be leased out to any person. A Sharia compliant Halal mortgage takes a different approach. There’s a real asset that’s being traded rather than just money being traded. Then this promise is acceptable and it creates not only a moral obligation, but also an enforceable right of the original seller. No part of this publication may be altered in any way, copied, or distributed without the prior express written permission of Saturna. He’s had, what, 12 years of experience specifically in the Islamic mortgages space. Even so, a number of reputable Muslim scholars have written fatwas which allow, on the basis of legal necessity (darurah), the purchase of homes in the west through mortgages. Islamic Mortgage Foundations and practices of a no-riba home mortgage. That’s the other thing that, you know, obviously, debt is looked down upon in our religion, so a lot of people that might wanna go to Hajj or go to Umrah to the pilgrimage, they’re looking at this debt and saying, “Okay I’m in debt, so I don’t qualify to go,” but when you’re in a co-ownership, you’re not in debt. You avoid private mortgage insurance, PMI, which ends up making your payments a little bit harder. CHRISTOPHER PATTON: I think it was exactly as he was describing when he says your first time through the process… it feels very demanding and very in-depth. But because this is an Islamic contract that I had to get approved by Sharia scholars and those type of things, that they can’t easily get approved, so they need somebody like a lawyer to present this to the regulatory body of that state and then they’ll get approval? Please contact the Islamic Investment banking Unit of the United Bank of Kuwait, London, they offer Islamic mortgages. A traditional mortgage is haram, but Islamic home purchase plans are halal. If you are interested in applying for a loan today, get in touch with us. AMJAD QUADRI: Well, you know, I would say that what happened is when Islamic financing first started and even for myself, when I first went with this local Korean bank, the rate that I was paying was almost 2 percent higher than what a conventional bank could have gotten at the time. The views and information discussed in this commentary are at a specific point in time, are subject to change, and may not reflect the views of the firm as a whole. This is attested to by the fact that in the time of the Prophet of Allah, Allah bless him and grant him peace, when a shield was stolen, and when an abba was misappropriated from among the spoils of war, no one refrained from buying shields or abbas. The Muslim jurists allowing this arrangement have based their view on the principle that "the promise can be made enforceable at the time of need". So let’s state you purchase a home for ₤ 100,000, and pay ₤ 20,000 as a deposit and ₤ 80,000 is contributed by the bank. Important Principles Prayer Salat Prophets of Islam The Quran Ramadan and … We have no interest in this.” We got very, very lucky in the fact that there happened to be a Muslim brother that worked there, and he was one of the attorneys that came to this meeting. Mortgage is permissible in Islamic law because it is a form of murabaha. Say, if you and I bought a house together and we were renting it out and it would rent for a thousand dollars a month, we’d take the thousand dollars in and split it halfway. The following banks and brokerage institutions offer Islamic, or no riba', home mortgages which are compliant with Islamic law. You’re actually in a business relationship with the person that you went into business with. No pre-payment penalties and no profiting off of delayed or default payments. The second one that you mentioned was a benefit for the customer is that if they were, let’s supposing they were either under water on their house and they had to sell it, or it got destroyed in some kind of natural disaster, then the company that has financed you will be basically eating some of the loss with you? One of the things within Islam is that if someone is in trouble, you can’t add to their troubles by increasing the late fees, changing the interest, adding onto their principal balances, things along those lines. So, to make sure they’re protected, you need a barred attorney in that state to look over the contracts, look over all of the protection laws, make sure nothing is breaking the laws and then basically give a legal ruling saying yes. This is permitted because Ijara can be effected for a future date. An Islamic home loan might be an intrigue free credit, however frequently it is a more unpredictable exchange. Thus, the concern of the questioner in this instance would appear to be in regard to hadith prohibiting one's direct and indirect participation in riba. Partnered with one of the country’s leading brokerages, Zero Mortgage Canada is a newly inaugurated option for those who need to secure home financing that adheres to Sharia law. As a result, Islamic mortgages tend to be taken out only by those Muslims who regard conventional mortgages as being religiously prohibited. This objection can be answered by saying that there is a big difference between putting a condition in the sale and making a separate promise without making it a condition. AMJAD QUADRI: That’s exactly how it’s done. Assalam Alaikum bro. MONEM SALAM: You mentioned that there are different types of contracts. MONEM SALAM: Number two follows that up: it’s the same as a conventional mortgage. But I thought Islamic finance should be different. 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