Looking to the BP community for insights on ways to structure a purchase while not breaking the Sharia Law of paying interest. Would love to hear your personal experiences. I'm looking for ownership structures, financing structures, or various methods for a buyer who follows Sharia Law to buy properties without breaking the rule? Grateful for you help since this is rather new to me and I'm gathering info and methods to help my serve my clients better.
I only have a rudimentary understanding of how this works from some friends of mine who bought houses in Dubai. The arrangement seemed very complicated but the net effect was something with a payment structure that looks like a typical mortgage.
I think the key would be to find a lender specializing in Sharia lending and let them set up all the structure.
Do a search here on BP...there was a past topic on this, and apparently the financing is somewhat available. It's not just Sharia but orthodox jews and others that have similar structuring requirements as far as not paying interest. From what I recall it is addressed using a 1 page addendum that says something to the effect of "the borrower is partnering on the purchase of the property with the lender, and is paying a fee equal to XYZ for the sole right to the ownership of the home". That fee is the interest...but because they are partners and it is buying back their right to ownership it complies. That's a really rough summary and just based on my recollection, but the point is there are solutions available.
@Matt Devincenzo Thanks for your input. I will search it and read up on it. I've done some google searches and found a few decent articles as well as a Report from a law practice on how to structure it and has a lot more supportive info which should help. Definitely another creative tool in the tool box for financing! I'll post the link below but they may flag it....
I have used UIF Corporation for multiple mortgages.
These are the five sharia-compliant lenders I know of:
1) UIF Corporation (https://www.myuif.com/)
2) Guidance Residential (https://www.guidanceresidential.com)
3) Ijara CDC (https://ijaracdc.com/)
4) Lariba (https://www.lariba.com/)
5) Devon Bank (https://www.devonbank.com/fait...)
Thank you for sharing! Do you know if any of them do specialize in commercial lending? We are looking to purchase multifamily
@Ben Tilbury I am not sure, but their websites should list all their services. I have personally only dealt with UIF, and they do deal with commercial properties. Do update on what you find out; may need this info some day.
@Rameez Balagamwala Were these investments properties? Are sharia-compliant lenders good for investments? and can you apply the Brrr method?