View Full Version : Lloyds New Mortgage

22nd Mar 2005, 23:27
Lloyds are apparently the first bank to market a Muslim friendly mortgage.

My question is, how do you lend money to some-one who doesn't accept credit?

I obviously need a new bank, any recommendations?

Boss Raptor
23rd Mar 2005, 07:42
As I understand it Islamic banking in simple terms revolves around the fact that the Lender cannot charge interest - therefore the way the mortgage or loan is structured is in such a way that the 'interest' is not obvious and/or is accounted for in another manner - dont ask me exactly how but this is the basis of how it works

23rd Mar 2005, 08:02

23rd Mar 2005, 08:14
Rather than lending money to a customer to buy a property, Lloyds buys a home for the customer, who then pays the purchase price in monthly instalments.

As the bank is the legal owner of the home, the customer also pays a monthly rent, which decreases as the customer buys the bank's share of the property. Eventually the customer buys out the bank, at which point ownership is transferred.

Llloyds scheme would seem to employ the principle of diminishing musharaka + rent.

There are three kinds of homebuying products which comply with Islamic rules.

The first, murabaha, allows ownership of a property to pass from the seller to the lender. The buyer then purchases it at a higher price, which the buyer repays over the term of the loan.

With the second, ijara, ownership passes from the home seller to the lender, who remains the legal owner of the property until the loan is repaid.

Finally, diminishing musharaka involves joint ownership between the lender and homebuyer. Each payment the buyer makes buys another part of the property.

23rd Mar 2005, 08:15
Read something about a bit back.

As far as mortgages go what happens is when you want to borrow the money the bank buys the property then sells it to you at a profit (e.g. you want 100k so the bank would buy the house then sell it to you for 110k, to be paid back over a period of time.). That way the bank doesn't charge interest but does make a profit on the sale.

I assume other loans would be structured similarly (the wording could be intereting though if you were, for instance, borrowing some money to pay for an operation. 'Your appendix is now worth 2000').

23rd Mar 2005, 08:23
Sorry but it seems to be a bit sleight of hand - smoke and mirrors in reality.

End result....

Regular bank makes a profit from lendee.
Islamic bank makes a profit from lendee.

23rd Mar 2005, 08:27
Sorry but it seems to be a bit sleight of hand - smoke and mirrors in reality

We are talking about religion. :rolleyes:

ps. Christianity used to have the same prohibition against usury/interest. Judaism didn't, which is why the jewish community cornered the market in money lending and acquired their reputation and stereotypes such as Shylock. Read here (http://www.answers.com/topic/history-of-the-jews-in-england), particularly "Ordinance of the Jewry" and "Under John".

Christianity in the Middle Ages had many of the characteristics we now regard as appaling in Islam. Christianity changed under the reformation, Islam has not had one. e.g.

"in 1222, when a deacon at Oxford was burned for the crime of converting to Judaism and for having married a Jewish woman"