The Truth about Halal Mortgages: Are They Really Halal?

admin_dev April 6, 2023

Are you considering a Halal mortgage to finance your home purchase but uncertain of its details? Halal mortgages have been gaining popularity as an ethical alternative to conventional mortgages, but are they truly Halal or just another marketing ploy? In this blog post, we’ll take a closer look at the reality of Halal mortgages and their potential benefits.

What is a Halal Mortgage?

Halal mortgages are financial products designed to align with Islamic law for home ownership. They don’t charge or pay interest, and repayments must follow Islamic principles. Also, they usually have a shared risk-reward structure between borrower and lender.

These mortgages have become more popular in recent years as an ethical alternative to conventional mortgages, attracting Muslim consumers who want to align their financial decisions with their religious beliefs.

Benefits of Halal Mortgages

When it comes to financing a home purchase, Halal mortgages offer several potential benefits:

  1. Avoidance of riba (usury): Halal mortgages are structured to avoid riba (usury), which is prohibited in Islam. This means interest payments do not increase over time.
  2. Flexible Repayment Terms: Halal mortgages often have flexible repayment terms that allow borrowers to make payments according to their financial situation.
  3. Transparent Processes: Halal mortgages have clear terms and conditions, ensuring transparency and avoiding hidden fees.
  4. Sharia-compliant: Halal mortgages must comply with Sharia law, ensuring your financial decisions align with your religious beliefs.

Risks of Halal Mortgages

Halal mortgages have gained popularity as an ethical alternative to conventional mortgages, but they also have certain risks to be aware of:

A. Limited Availability: Halal mortgages are offered by a limited number of lenders and often require a larger down payment and certain eligibility criteria such as a good credit score and low debt-to-income ratio.

B. Strict Guidelines: Halal mortgages have strict guidelines, requiring borrowers to follow Islamic law, abstain from activities like gambling and alcohol consumption, and meet certain income, expense, and asset criteria.

It’s crucial to consider the risks associated with Halal mortgages before taking out this type of loan. Research thoroughly and ensure you understand the risks and are comfortable with the terms.

In conclusion, Halal mortgages are a great option for those seeking to make a financial investment in line with their religious beliefs. Make sure to research and choose a reputable lender with a good track record.

At EQRAZ, we offer a Halal mortgage tailored to meet our customer’s needs and provide a Wakala Agreement to align with Islamic principles. Contact us if you’re interested in learning more about EQRAZ’ halal home mortgages.