What you need to know about a trust
A trust is a legal entity created to hold property on behalf of another party, and its job is to look after that property at the direction of the beneficiaries. Trusts are often used for assets after death, but they can equally hold real estate for living beneficiaries.
Six reasons to hold real estate in a trust
Each of these applies whether or not you are financing through ijara — and the last is why the structure works for Muslim buyers.
Real estate records are public, so anyone can find who owns a property, what it is worth and what was paid for it. A trust conceals the identity of the owner — useful when you are acting as a landlord and prefer renters to deal with the property manager.
A trust makes a property held by several owners easier to administer, such as siblings who inherit real estate. The trust can rent out, sell or act on the beneficiaries’ behalf without each of them signing.
Beneficiaries can be changed at any time, so ownership transfers simply — no contracts, notaries or public records. That can also avoid triggering transfer and sales taxes, or a higher tax assessment on sale.
Probate can be lengthy and carries fees. A trust can name contingent beneficiaries who inherit the property automatically, transferring ownership without a long probate process.
Liens filed against an owner can attach to a property and make it hard to sell. Because the trust owns the property, liens against the seller cannot attach to it — even an IRS lien on one beneficiary.
Sharia restrictions on riba and unequally shared risk rule out a traditional mortgage. Under ijara-wa-iqtina a trust owns the property and leases it to the customer, and must sell it to them under a promise to purchase — a lessor and lessee arrangement rather than creditor and debtor.
Have more questions? Don't hesitate to reach us
Our team answers by phone or email during business hours, and a pre-qualification takes about ten minutes.
How is this different from a mortgage?
ijara CDC co-owns the property with you and sells you its share over time. There is no riba, because there is no debt instrument — the agreement transfers ownership, not money at a rate.
What does a monthly payment cover?
Two parts: your use of the share ijara CDC still owns, and the purchase of an additional slice of that share. The second part grows as your ownership grows.
How long does pre-qualification take?
About ten minutes, and it does not affect your credit.
Can I pay off my share early?
Yes. Additional payments buy more of the co-owned share and carry no penalty.
Which states does ijara CDC serve?
More than 20 states across the USA, alongside Canada. Contact us for the current list and the requirements where you live.
Who reviews the contracts?
The Sharia Advisory Board and real estate counsel review the structure and the documents before signing.
What can I finance?
Residential and commercial property, residential and auto conversions, investment opportunities, and the ijaraCDC partner broker program.