2. Question on Agreement Format: LAriba requires the clients to sign the financing agreement on the standard Loan Application “format” approved by the U.S. Government (probably to comply with the US Laws), which reads as follows: “The undersigned specifically acknowledges and agrees that: (a) the loan requested by this application will be secured by a first mortgage or deed of trust on the property described in this application, (b). that the property will not be used for any illegal or prohibited purpose” In order to comply with the U.S. laws and financial regulations, LARIBA takes the monthly payment obtained from the Lease-To-Purchase model and inputs it into a traditional mortgage program to obtain the “Implied Interest Rate” as required by the US laws, and shows this figure as interest on the application form to the Government. Question#2: Is it permissible under Sharia to sign such an agreement ? Many like me in USA would like to take home financing from LARIBA, but are hesitant because of the above mentioned items. Please give us your advice. Thanks very much for your kind advice. Jazakallah. With respects, Kazi Ahmed
If the La-Riba institute follows the procedure of the Diminishing
Partnership Contact as explained by Mufti Taqi Usmani Saheb in his book,
‘Islamic Finance’, then it will be permissible.
If the institute is required by law to put the monthly payment in a
traditional mortgage programme, it will be excused for doing so. However,
the interest obtained under such circumstances must be given in charity to
the poor and needy.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai