What is a Halal
Mortgage and How
Exactly Does it
Work?
Understanding Islamic Finance
Islamic finance is a system that revolves around banking,
lending, and saving methods in alignment with Shariah, or
Islamic law. The guiding principles of this system are formed
from the teachings of the Quran. The two pillars of Islamic
finance revolve around joint benefit and loss sharing and the
prohibition of accruing or disbursing interest by lending
entities and investors.
About Halal Mortgage
Halal mortgage is a property financing option that follows
Islamic law and does not include interest payments because
they are prohibited by the Shariah. The difference between
halal and conventional mortgages lies in their structure. The
former abandons interest payments whereas the latter does
not.
How Halal Mortgage Works
A halal mortgage loan follows a profit-sharing or lease-toown model. The first step in the process involves the bank
purchasing the desired property. After that, the bank sells
the property to the client at an agreed-upon, often higher,
price payable via a series of installments over a
predetermined period, thereby neatly bypassing the charging
of common interest.
The Murabaha Transaction
Murabaha or cost-plus financing is a cornerstone of a
halal mortgage loan. This commercial exchange
process entails the trading of commodities at a cost,
incorporating a profitability boundary endorsed by
both entities involved. The principal significance of
Murabaha lies in its commitment to transparency and
adherence to Islamic law prohibiting usury and
deceptive practices.
Choosing Halal Mortgage
Islamic finance establishments are proud to create a
harmonious balance between Islamic finance principles
and modern banking needs. Their commitment is evident
in their customer-oriented transactions, empowering
clients with a combination of ethical and competitive
financial solutions.
THANK YOU
Visit: ALT Financial Network Inc.