Fatwa ID: 03117
Answered by: Maulana Nabil Khan
Any feedback on guidance Residential/ Zero Mortgage and the model they use for Halal financing?
In The Name Of Allah, The Most-Merciful, The Most Kind
Zero Mortgage is a shariah based model that provides a Diminishing Musharakah method to home purchasers. This method is such that the bank partners in the purchase of the home and the home have 2 partners. 1 partner is the financial institute and the other partner being the consumer. Between 2 partners there is a mutual agreement that the consumer will buy back the shares of the investor (financial institute) throughout a predetermined period. This constitutes the diminishing part of the partnership where the financier’s share will diminish over time while the consumers share shall increase. In this, there is no profit rather a transitioning of shares at the same dollar rate.
Profit in this model is made by a rent (ijarah) structure, wherein the consumer agrees to pay a rate of profit monthly to the other partner in return for occupying the home in its entirety. This lease is a justified shariah based profit since the financier owns a portion of the home and is leasing this to its partner for a monthly rent cost mutually agreed upon between both parties.
This partnership comes to an end the moment 1 party have 100% ownership of the property.
This is a shariah model that is being implemented worldwide and is backed by prestigious scholars as well and authentic fiqh. It is best to either rely on the shariah scholars that are auditing the company or question the board. It is not possible for a third party to give details of all the documentation concerns or the intricate details within the product and the rules and regulations differ by government rules and other factors existent therein.
What we can say is that the method of diminishing musharakah provided by guidance and zero mortgage is well known in the shariah financial world and the scholars on those boards should be questioned for any specific concerns.
Al-Iqtisaad Al-Islamiyy pg 53
Only Allah knows best
Written by Maulana Nabil Khan
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham