What is a halal mortgage?
As Canada’s Muslim population grows, demand is increasing for real estate financing that complies with Islamic law. Learn about halal mortgages.
Why are mortgages so expensive in Canada?
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A halal mortgage is a mortgage that complies with Shariah, Islamic law. Halal is an Arabic word that means “lawful” or “permitted.” The term is commonly used to refer to food and drink. Products such as alcohol, pork and meat slaughtered by non-halal methods are haram, or not halal.
Because Shariah prohibits paying and receiving interest, Muslims seeking mortgage financing must find products designed without interest payments. Some halal mortgages are structured as “rent-to-own” deals while others involve a co-ownership agreement between the borrower and the lender. A third type requires the lender to buy the property and sell it back to the home buyer.
Down payments and borrowing costs may be higher for halal mortgages than conventional mortgages. And because the structures of these mortgages vary, they may be difficult to insure. Currently only a limited number of lenders offer them, including the Canadian Halal Financial Corporation, Eqraz, Manzil and certain private lenders.
(In addition to mortgages, some exchange-traded funds, mutual funds and other products are designed to comply with Shariah, providing halal investment options.)
Example: “In the April 2024 federal budget, the government pledged to explore expanding the availability of halal mortgages, providing Muslim Canadians with better access to home ownership. At the time, none of the six major banks offered halal mortgages.”
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