The recent federal budget’s mention of exploring measures to increase access to halal mortgages, has Muslim’s and Islamic finance providers celebrating. Although it is still lacking in details from the Government. 
What are Halal Mortgages?
Halal, meaning ‘permitted’ under Islamic law, refers to mortgage products structured without interest charges or ‘riba’, which are forbidden. The lack of interest does not mean these mortgages are cost-free. They often carry higher costs than conventional mortgages due to the limited number of providers and the inability of some to foreclose, raising financial risks. Mortgage experts estimate current halal mortgage costs run around 4% above conventional products. However, wider availability from more providers could spark competition to lower fees.
Challenges and Legal Ambiguities
The absence of established legal definitions for these interest-free mortgages complicates matters, making it difficult for them to be insured and potentially leading to higher expenses. Islamic finance experts point out that the structure of halal mortgages often differs from conventional ones, sometimes resembling rent-to-own arrangements, or involving unique fee setups instead of typical interest payments. Legal challenges also persist, such as issues with land titles and the application of landlord and tenant legislation to certain contracts.
The recent federal budget’s exploration of halal mortgages is a significant move towards inclusive financial solutions. Despite higher costs and legal complexities, the potential for broader availability and competition, could make these products more accessible and affordable for Muslim Canadians. This recognition marks a positive step in supporting diverse financial needs within the community.
Original article: www.mpamag.com
