Mortgages Concept in Islamic Banking

According to documented Shariah jurisprudence opinion which is known as Fatwa, the proposed arrangement is having the following transactions:


 To create joint ownership in the property (Shirkat-al-Milk)
 Giving the share of the financier to the client on rent.
 Promise from the client to purchase the units of share of the financier.
 Actual purchase of the units at different stages.
 Adjustment of the rental according to the remaining share of the financier in the property.

It's a transaction in which a buyer purchases a home through a rent-to-own agreement. A conventional mortgage, in which a buyer repays a loan with interest, violates the Quran, which forbids the payment or receipt of interest.
The Holy Quran forbids "riba", which is interest, or usury. Yet Muslims need money and banks need to make a living. Systems are devised to get round the ban. For example, instead of a Muslim holding a mortgage for a house, the bank can own the house and make arrangements for the Muslim gradually to buy it off the bank over a period of years.