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Sharia loans

LancsLad said:
Such a problem this will be for New York bankers.
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Isn't Citicorp owned by saudies and Abu Dabaiers now?
 
bbking said:
...it already exists, I know several private investors and one Mortgage Company that structures debt based on Islamic anti-interest rules.


bbk
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Are dividends OK under the sharia rules?
 
Heck, I wonder if any of us can apply for one if the rates etc. . . are better?

As I understand them (and I may be mistaken) basically the bank substitutes interest on the mortgage for simultaneous rental payments by you on the house together with over time payments where you gradually buy out the bank's share of your joint ownership.
 
bbking said:
... the answer to the first point, is no. You won't see the Schedule A or B banks do them because no matter how it is done it has to be converted to an interest rate. You really wouldn't want to do this anyways as you would get soaked on the fees. . .
It really makes no sense for a non-Muslim investor to get into this kind of deal unless the fee is enormous. bbk
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BB, Do I properly understand that from the Mortgagor's (the debtor's) perspective a standard mortgage is a much better deal, than this sort of arangement (which makes sense, since otherwise why wouldn't people have demanded them long ago).
 
Aardvark154 said:
BB, Do I properly understand that from the Mortgagor's (the debtor's) perspective a standard mortgage is a much better deal, than this sort of arangement (which makes sense, since otherwise why wouldn't people have demanded them long ago).
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I would assume that when the bank co-owns the property with you, that the bank assumes some of the risk that the property value will decline, and also benefits when the value of the property rises as well.

In fact at the outset of the mortgage if you owned 10% and the bank owned 90% and the home went up 20% in value, most of that gain would go to the bank instead of you.

I don't know if that is how the Sharia deals are structured or not, but it does seem like it has an advantage in one sense: If you co-buy a home with the bank and property values crash you are not then stuck with a mortgage for much more than the property is actually worth.
 
bbking said:
I'm not sure ... most likely not since they are not interest but capital distribution.


bbk
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Dividends are capital distribution???????????
 
I've always thought of dividends as income distribution.

OTB
 
danmand said:
Really?

http://en.wikipedia.org/wiki/Dividend_tax
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Don't ask me where my head was (actualy I do know and it was on neither on this or sex) which is why one should never give real answers off the top of one's head. Stock splits etc. . . are Capitial distribution and not taxed until realization. You are of course entirely correct that regular cash dividents are currently considered ordinary income in the U.S. although interestingly for many years from 1920 until the late 1930's they were not. Sorry for such a bone headed incorrect comment.
 
When are we going to see this nonsense in Canada?
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This is simply a financial product. Nothing to get upset about. I think we came close to doing something much worse when we flirted with the idea of Sharia courts in Canada.
 
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