Home Purchase

1) The Islamic bank and the home buyer (the bank customer, and partner in this transaction) each contribute a percentage of the purchase price of the house.

2) The bank and customer are joint owners of the house.

3) The customer takes possession of the house.

4) The bank leases the house to the customer.

5) The rent calculation may not be unilateral determined by the bank, nor variable; it must be based on market rates.

6) Concurrently with paying rent, the customer has the option to purchase ownership shares in the house from the bank. The price of the shares should be based on the market value of the house at the time of the share purchase.

7) If the customer should default on the rent, the bank and the customer respectively recover their share of equity in the house.

8) Rent payable diminishes as shares are transferred from bank to customer.

9) When the customer owns all of the shares the ownership of the house is fully transferred and the bank has no further claim to ownership.

 

Mejelle, 10th Book, Preface-Definitions and Chapters I-III

An introductory contemporary treatment of Islamic Mortgage Contracts in the UK (published 2009 — some bibliographic links missing)