Question 1

Understanding ethical limitations with traditional mortgages

Accepted Answer

For devout Muslims, Sharia law prohibits mortgages because of the prohibitions on riba and unequally shared risk. The Ijara-wa-Iqtina (lease and ownership) process allows Muslims to create a rent-to-own agreement in which the home’s inhabitant becomes a renter, thus abiding by Sharia principles.

Question 2

How Ijara complies with Sharia Law

Accepted Answer

The Ijara process is asset-based rather than credit-based Islamic financing method that has been used in the U.S. for more than 20 years. Similar to conventional auto leases, the Ijara loan sets up a lessor-lessee relationship rather than a creditor-debtor relationship. An Ijara sets up a Trust which becomes the owner of the real estate property in question. The Trust then leases the property to the customer. The customer pays a portion of the purchase price every month as a rental payment. When the customer wishes to move out of the house, the Trust is obligated to sell the property to the customer under the terms of a promise to purchase; then the customer becomes the sole owner. However, while the customer is entitled to purchase the property, they are not obligated to do so.

In compliance with Sharia law forbidding unequally shared risk (Gahrar or Gharar), the Trust is the sole owner and thus takes on 100% of the loss or gain, which it then passes along to the beneficiary, who is usually the customer. This sharing of gain or loss is directly related to a Musharaka transaction. Ijara loans can be used for a wide variety of items, but are most common with high-value items such as houses. Ijaramortgages are legal under U.S. banking regulations and comply with the provisions of the Truth in Lending Act.

Question 3

How the Program Works

Accepted Answer

The individual selects the property;

Pays the required on-account payment (traditionally called down payment), which could be 3.5% to 20% or higher if the individual chooses to do so.
An independent trust holds the title to the property.
The house can be leased for 10, 15, 20 or 30 years, depending on the individual choice.
The lessee pays monthly rent to the trust, also called on-account payments. The trust will pay real estate taxes and property taxes on behalf of the lessee and add these to the monthly rent. At the end of the lease period, the title is transferred to the lessee for a fee of $1.00.
Should the personal situation for the lessee change and he or she has a need to sell the house, the trust is informed of this need and an arrangement is made to sell the house. If there is a profit, the lessee keeps 100% of the profit. If there is a loss, the lessee bears the first loss.

Even though the ‘Lease to Purchase’ program was specifically designed to meet the religious obligations of Muslims, it is made available to all qualified people in the United States and Canada that are interested in a Sharia Compliant Islamic Financing Product.

View additional information on the Ijarah process

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Question 4

Documents We Provide To A Mortgage Process

Accepted Answer

Our transaction adds the following documents to a traditional mortgage process:

Intervivos Revocable Trust
Lease
Promise to Purchase
Deed to Trust
Assignment of Rents and Leases

Question 5

We Can Help With Ijara Financing

Accepted Answer

You’ve been working hard to build your life up here in North America and decided the time has come to look into the real estate options that you have as a devout Muslim. We can help with a variety of ijara financing products that we’ve implemented for our valued clients in the United States. Living in Canada? That’s no problem, as all you need to do is look through our ijara Canada products.

We’ve taken the time to make sure that all of your questions are answered whether you’re interested in ijara financing as it relates to Hajj Qualification, Sharia compliance, or any of the other issues that revolve around these speciality loans.

An Ijara loan that’s easy to understand

Job one for us here is customer satisfaction. That’s why we strive for an Islamic financing process that’s easy to understand for our valued clients. For example, the application process is clearly laid out on our website. We even have an easy to understand glossary with terms and phrases to make a clear choice when it comes to the Islamic financing product that’s right for you.

Of course you’ll want to know what people just like you think about the Islamic financing programs we have. To that end , we’ve collated client testimonials from real people who wanted to stay Sharia compliant and buy and sell real estate.

Get in touch with us today so we can help you to find the ijara financing product that’s right for you.

Question 6

Your rights as a renter

Accepted Answer

The customer does not own the property; he or she is a renter. However, the customer has rights not granted to most renters. They can decorate, remodel, sublet, or conduct any other activity that does not have a negative impact on the property value. The customer also has all obligations for upkeep and maintenance – and can sell the property at any time.

How ijara works

We create a Trust

The Trust owns the property

You have a lease to own agreement

Each month you make a rent payment

Part of your payment goes to ownership

Download an explanation of Ijara in:

Questions about the process