How Ijara Works
Our IjaraTM Home Financing Program was created by a Board of Internationally recognized Shariah Scholars and has been available since 1996. The program complies with Islamic Finance Guidelines and is free of both types of Riba and also Gharar.
The program is called “Lease to Purchase” (Ijara wa Iqtina). The Lease to Purchase or Lease to Own contract blends many of the concepts used by traditional lending institutions. The architects of the Ijara Contract used here were guided by three basic principles:
To create interest/riba-free financing.
To retain the income tax deductibility benefits of the traditional home mortgage.
Download an explanation of Ijara in:
For devout Muslims, Sharia law prohibits mortgages because of the prohibitions on interest and unequally shared risk. The Ijara-wa-Iqtina (lease and ownership) process allows Muslims to create a rent-to-own agreement in which the home’s inhabitant becomes a renter, thus abiding by Sharia principles.
The Ijara process is asset-based rather than credit-based Islamic financing method that has been used in the U.S. for more than 20 years. Similar to conventional auto leases, the Ijara loan sets up a lessor-lessee relationship rather than a creditor-debtor relationship. An Ijara sets up a Trust which becomes the owner of the real estate property in question. The Trust then leases the property to the customer. The customer pays a portion of the purchase price every month as a rental payment. When the customer wishes to move out of the house, the Trust is obligated to sell the property to the customer under the terms of a promise to purchase; then the customer becomes the sole owner. However, while the customer is entitled to purchase the property, they are not obligated to do so.
In compliance with Sharia law forbidding unequally shared risk (Gahrar or Gharar), the Trust is the sole owner and thus takes on 100% of the loss or gain, which it then passes along to the beneficiary, who is usually the customer. This sharing of gain or loss is directly related to a Musharaka transaction. Ijara loans can be used for a wide variety of items, but are most common with high-value items such as houses. Ijaramortgages are legal under U.S. banking regulations and comply with the provisions of the Truth in Lending Act.
The individual selects the property;
- Pays the required on-account payment (traditionally called down payment), which could be 3.5% to 20% or higher if the individual chooses to do so.
- An independent trust holds the title to the property.
- The house can be leased for 10, 15, 20 or 30 years, depending on the individual choice.
- The lessee pays monthly rent to the trust, also called on-account payments. The trust will pay real estate taxes and property taxes on behalf of the lessee and add these to the monthly rent. At the end of the lease period, the title is transferred to the lessee for a fee of $1.00.
- Should the personal situation for the lessee change and he or she has a need to sell the house, the trust is informed of this need and an arrangement is made to sell the house. If there is a profit, the lessee keeps 100% of the profit. If there is a loss, the lessee bears the first loss.
Even though the ‘Lease to Purchase’ program was specifically designed to meet the religious obligations of Muslims, it is made available to all qualified people in the United States and Canada that are interested in a Sharia Compliant Financing Product.
View additional information on the Ijarah process
Download Brochure Click Here
Our transaction adds the following documents to a traditional mortgage process:
You’ve been working hard to build your life up here in North America and decided the time has come to look into the real estate options that you have as a devout Muslim. We can help with a variety of ijara financing products that we’ve implemented for our valued clients in the United States. Living in Canada? That’s no problem as all you need to do is look through our ijara Canada products.
We’ve taken the time to make sure that all of your questions are answered whether you’re interested in ijara financing as it relates to Hajj Qualification, Sharia compliance, or any of the other issues that revolve around these speciality loans.
An Ijara loan that’s easy to understand
Job one for us here at ijara usa.com is customer satisfaction. That’s why we strive for a process that’s easy to understand for our valued clients. For example, the application process is clearly laid out on both our websites and we even have an easy to understand glossary that can help you to get familiar with the terms and phrases you ‘ll need to understand so you can make a clear choice when it comes to the ijara financing product that’s right for you.
Of course you’ll want to know what people just like you think about the inventory of ijara loan products we have. To that end , we’ve supplied client testimonials from real people who wanted to stay Sharia compliant and buy and sell real estate.
Ijara financing and a live chat
Perhaps best of all, we’ve stayed on top of the latest innovations and how they relate to the products and services we offer here at ijara usa.com by offering options like a live chat.
Why not get in touch with us today so we can help you to find the ijara financing product that’s right for you?
The customer does not own the property; he or she is a renter. However, the customer has rights not granted to most renters. They can decorate, remodel, sublet, or conduct any other activity that does not have a negative impact on the property value. The customer also has all obligations for upkeep and maintenance – and can sell the property at any time.
Help Us Spread The Word
Download A Poster And Place It In An Appropriate Location,
Click Here to download
The Sharia contract “Lease to Purchase” is owned and copyrighted by Samad-Ijara Home Financing, LLC, which is also the master licensee for the US. Ijara Marketing, LLC may license the program to other financial organizations that might be interested in meeting the needs of the Muslim market in the United States. www.Ijaraloans.com, www.ijaracdc.com, and www.ijaracdc.com are owned and operated by Ijara Community Development Corporation, a Michigan Non-Profit Corporation. A complete history is available on our site.