“You know Abdul, islamic home finance just sounds like a conventional mortgage with different words.”

Have you been in Abdul’s shoes before? Have you looked into islamic home financing products and couldn’t determine the difference between it and a conventional mortgage?

This is a common misconception around islamic home financing. On the surface, both financing products do look similar. This is a function of the financial system in the US rather than the products themselves.  

The chief difference between a conventional mortgage and an islamic mortgage is the contract. In a conventional mortgage, money is lended to you (the homebuyer) by the bank and you use that money to purchase the home. When money is lended, the bank charges interest for doing so. The interest (riba) is what makes a conventional mortgage haram.

In an islamic mortgage, no money is being lended. Instead, the lender like Mubarak Mortgage is purchasing the home for the homebuyer and selling the home back to you at a profit (Murahaba). As there is an asset exchanging hands and the profit is structured into the contract, there is no interest and thus this method is halal.

Does this sound like a favorable transaction to you? If so, please call us at 833-562-6453 and our experts will guide you through the process of buying a home the halal way.