Halal Mortgage
A home financing arrangement structured to avoid interest (riba), typically using diminishing partnership or lease-to-own models.
Definition
A home financing arrangement structured to comply with Islamic law by avoiding interest (riba).
In Canada, halal mortgages typically use one of three Shariah-compliant structures: (1) Musharakah Mutanaqisah (diminishing partnership) — the buyer and provider co-own the property, with the buyer gradually purchasing the provider's share; (2) Ijara (lease-to-own) — the provider purchases the property and leases it to the buyer until full ownership transfers; or (3) Murabaha (cost-plus) — the provider purchases the home and sells it to the buyer at a transparent markup with installment payments.
Related Terms
Diminishing Partnershipمشاركة متناقصة
A co-ownership arrangement where the buyer gradually purchases the provider's share — a common halal home financing structure.
Musharakah Mutanaqisahمشاركة متناقصة
Diminishing partnership — a widely used halal home financing structure.
Ijaraإجارة
A lease or rental agreement — one of the three main halal home financing structures used in Canada
Murabahaمرابحة
A cost-plus sale where the seller discloses the original cost and adds a transparent, agreed-upon markup.
Ribaربا
Interest or usury — the most strictly prohibited practice in Islamic finance.
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Halal Mortgage — A home financing arrangement structured to avoid interest (riba), typically using diminishing partnership or lease-to-own models. A home financing arrangement structured to comply with Islamic law by avoiding interest (riba). In Canada, halal mortgages typically use one of three Shariah-compliant structures: (1) Musharakah Mutanaqisah (diminishing partnership) — the buyer and provider co-own the property, with the buyer gradually purchasing the provider's share; (2) Ijara (lease-to-own) — the provider purchases the property and leases it to the buyer until full ownership transfers; or (3) Murabaha (cost-plus) — the provider purchases the home and sells it to the buyer at a transparent markup with installment payments..
- A home financing arrangement structured to avoid interest (riba), typically using diminishing partnership or lease-to-own models.
- Category: Financing Structures
- Related: Diminishing Partnership, Musharakah Mutanaqisah, Ijara, Murabaha, Riba
- Compare related Shariah-compliant products on HalalWallet
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This page is reviewed against HalalWallet editorial standards and source documentation.
Reviewed by: HalalWallet Editorial Team
Last reviewed: 2026-07-01
Editorial Team, HalalWallet
Independent halal finance research
Reviewed quarterly and updated for major content changes.