{"id":5390,"date":"2023-12-19T10:46:30","date_gmt":"2023-12-19T10:46:30","guid":{"rendered":"https:\/\/www.guidanceresidential.com\/resources\/?p=5390"},"modified":"2023-12-19T22:47:39","modified_gmt":"2023-12-19T22:47:39","slug":"are-guidance-residential-islamic-home-mortgage-loans-really-halal-2","status":"publish","type":"post","link":"https:\/\/www.guidanceresidential.com\/resources\/faith-based-financing\/are-guidance-residential-islamic-home-mortgage-loans-really-halal-2\/","title":{"rendered":"Are Guidance Residential \u2018Islamic Home Mortgage Loans\u2019 Really Halal?"},"content":{"rendered":"\n

We hear this question often: Is Guidance Residential\u2019s Islamic home financing really halal? The answer is a simple and resounding YES<\/strong>. <\/p>\n\n\n\n

Guidance Residential\u2019s model of Islamic home financing was created with the help of top scholars to fill the need for Islamic home financing in America, and our model remains approved by independent scholars today. <\/p>\n\n\n\n

The question as worded in the title is misleading, because our home financing isn\u2019t a \u201cmortgage loan\u201d at all. There are some external<\/em> similarities between Islamic home financing and a mortgage loan, but in reality they are based on completely different foundations. Our Islamic finance<\/a> offerings are riba<\/em><\/a>-free and accepted by independent Islamic scholars as completely halal. <\/p>\n\n\n\n

Are Mortgage Loans Permissible in Islam?<\/h3>\n\n\n\n

Before we go further, let\u2019s address the question of whether mortgage loans are allowed in Islam<\/a>.<\/p>\n\n\n\n

Scholars of Islamic finance are in agreement that traditional mortgages involving the payment of interest is not an acceptable method to buy a home. Some scholars have stated that extenuating circumstances may make a conventional mortgage loan permissible if there is no other option. Now, however, there are other options.<\/p>\n\n\n\n

It is now possible for home buyers to avoid using an interest-bearing conventional mortgage loan when buying a home in the United States. This means it is clear that a Shariah-compliant approach is preferable — if not the only permissible option under principles.<\/p>\n\n\n\n

3 Steps Guidance Residential Has Taken to Ensure Our Islamic Home Financing Is Halal<\/strong><\/h2>\n\n\n\n

Step 1: Founded on Faith\u2014and Meticulous Research<\/h3>\n\n\n\n

Guidance Residential\u2019s purpose for existing is to provide a halal alternative to a conventional mortgage loan for faith-conscious American families.<\/p>\n\n\n\n

To that end, before ever opening for business, Guidance Residential spent three years researching and building a Shariah-compliant<\/a> co ownership program of home financing that would work within the confines of American society.<\/p>\n\n\n\n

Guidance worked with six world-renowned Muslim scholars of to create a Declining Balance Model of Co-Ownership<\/a> based on the Islamic principle of Musharakah Mutanaqisa<\/em><\/a>or\u201cDiminishing Partnership.\u201d<\/p>\n\n\n\n

How It Works<\/h4>\n\n\n\n

Conventional mortgages are based upon lending of money — essentially selling money now for more money later. In return for borrowing the money, the borrower pays the lender riba, or interest, which Islam forbids.<\/p>\n\n\n\n

Guidance Residential’s model of riba free halal financing, on the other hand, is not a loan. It establishes a co ownership agreement with each home buyer, in full compliance with Islamic law.<\/p>\n\n\n\n

Our co ownership<\/a> model of home financing is a partnership in which we buy a home together with the customer. The home buyer does not pay interest, because it isn\u2019t a loan.<\/p>\n\n\n\n

After purchasing the home with Guidance and paying a down payment, the home buyer then gradually buys Guidance’s co ownership stake in the property.<\/p>\n\n\n\n

The home owner’s monthly payments consist of two parts. As the sole partner who is actually using the home each day, the home buyer pays Guidance Residential a fee each month for using our portion of the property (a profit payment), while also buying out our share over time (an acquisition payment). This arrangement is completely acceptable under Shariah guidelines.<\/p>\n\n\n\n

The co owners enjoy a much more equitable relationship than the lender-borrower relationship of a traditional mortgage. Home buyers maintain full home ownership rights from the beginning, plus some additional benefits over many conventional mortgage loans, such as risk sharing, capped late payment fees and zero prepayment penalty.<\/p>\n\n\n\n

This provides a sharia compliant path to home ownership for American Muslims as well as other home buyers who prefer a more just and equitable alternative to a traditional mortgage.<\/p>\n\n\n\n

>> Related Read – <\/em><\/strong>The Purpose of an LLC in Islamic Home Financing<\/em><\/strong><\/a><\/p>\n\n\n\n

Authenticity Guaranteed<\/h4>\n\n\n\n

Unparalleled in its expertise, our independent Shariah Supervisory Board comprises some of the world\u2019s leading scholars of Islamic financial transaction law. These renowned experts were actively engaged in the design of our home financing program, and they remain involved in its ongoing oversight to ensure that it remains sharia compliant.<\/p>\n\n\n\n

This extensive development process ensured that the resulting model was carefully and firmly planted in Shariah law and in ethical, equitable, and permissible financial practices.<\/p>\n\n\n\n

>> <\/em><\/strong>Fatwas<\/em><\/strong><\/a> on the permissibility of our services are available for view.<\/em><\/strong><\/p>\n\n\n\n

Similar on the Surface Only<\/h4>\n\n\n\n

Any financing in the United States must follow federal, state, and local rules and regulations. On top of that, home buyers need to be able to compare our product with other companies’ mortgages.<\/p>\n\n\n\n

For these reasons, our product is structured in a way that looks familiar to those who are familiar with a mortgage, and our pricing is competitive with conventional loans as well.<\/p>\n\n\n\n

However, comparing a loan with Islamic financing is like looking at similar icing on top of two very different cakes. Our cake is halal.<\/p>\n\n\n\n

>> Related Read –<\/em><\/strong> The Difference Between an Islamic Mortgage and a Conventional Mortgage<\/em><\/strong><\/a><\/p>\n\n\n\n

Step 2: Focusing on Riba-Free Home Financing<\/h3>\n\n\n\n

It’s important to note that Guidance Residential is not a bank<\/a>. After taking the lead as the pioneering company offering Islamic home financing in America, that service still remains our sole focus.<\/p>\n\n\n\n

It is now possible to find large banks that have begun to offer \u201cIslamic home loans\u201d on this side. At the same time, they are still a traditional bank dealing with a multitude of other non-halal services and practices that are not compatible with Islamic finance.<\/p>\n\n\n\n

Guidance Residential, on the other hand, has remained true to our authentic purpose and our principles. <\/p>\n\n\n\n

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