Some Muslims are calling “Sharia-compliant” mortgages “fraud.” Critics say they are nothing more than mortgages with front-loaded interest. Interest is prohibited in Islam.
Sharia-compliant mortgages are also up to 1-3% more expensive than conventional mortgages in Canada, according to the Financial Post. In the United States, they cost only 0.4%-1% more.
That said, there is apparently high demand for such products. Bank of Nova Scotia and TD are both considering offering them and UM Financial, a Muslim lender from Toronto, reportedly has a 5000 person waiting list.
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Side Note: Here is an example of a “Sharia” mortgage calculator: Musharakah Calculator.
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Last modified: May 31, 2007
The lender (partner) gets something for giving the borrower money right? You can call that compensation anything you want, but it’s still interest.
Zero coupon bonds have no “interest” payments (because you buy them at a discount from their value at maturity). Nonetheless, everyone knows they still pay implicit interest.