Halal Mortgages

Date Posted: May 1, 2024

The 2024 federal budget unveiled plans on April 16 to introduce "halal mortgages" in a bid to enhance access to homeownership. But what exactly is a halal mortgage, and will it truly broaden homeownership opportunities?

What is a halal mortgage?

A halal mortgage is a Sharia-compliant alternative to conventional mortgages, designed for Muslims who seek homeownership without interest-based financing, as it's prohibited in Islamic law.

Benefits:

• Enables Muslims to purchase homes without violating Islamic principles.
• Provides an inclusive option for homeownership, regardless of faith.
• Eliminates interest on the mortgage.
• Entire mortgage payment goes directly to paying down the principal.

Downfalls:

• Typically more expensive than conventional mortgages due to different capitalization methods.
• Limited availability and complexity, with only a few companies offering this type of mortgage.
• Limited models available, with Murabaha and Musharaka being the primary options due to complications with Ijarah.

Who can obtain a halal mortgage?

Halal mortgages are available to everyone, regardless of faith. Eligibility is not discriminatory, and individuals seeking Sharia-compliant financing can explore this option.

Halal mortgages have always been around; however, a new light has been shined on them when the government announced they would like to see them become available at major banks. While you do not have to pay interest on the loan, the initial mortgage you will take on will cost more than a standard mortgage. This is so the investor can receive a fair return on their investment.