Sharia student account

[oraclesmith]

So... if the bank starts getting into trouble, it could sell these properties that it actually owns (ie. is the title deed holder) thus making lots of people homeless ?

[BankingContractor]

[QUOTE=Fleetwood]It's all a question of phrasing. Sharia doesn't allow you to charge interest, but it does allow you to make a profit.
Example : You want to buy a flat for 150K. You or I would go to the bank and get a mortgage, but the bank would charge us the dreaded word "interest".
In a Sharia transaction, the bank buys the flat for 150K, and immediately sells it to the Mussie punter for 200K, making 50K profit, which it's allowed to do, and your Mussie punter spends the next twenty years paying the bank back. The word "interest" appears nowhere. Sorted.

How many of us contractors are currently working in the City? Can't you see its not the same thing..!!

Firstly, the bank has to shell out 200k so it owns the property. In this way, the bank is forced to lend responsibility as it has a property risk/exposure, so no more mortgages at 10x earnings, to grads!

The way it is structured is the buyer owns a larger % of the property every times he makes his monthly payment. Say he put down 20k deposit, he would own 10% at the start of the agreement. The monthly payment consists of both capital repayments & rent (on the part of the property he doesn't own). So after the first month he may end up owning 10.2% of the equity. So each month his equity increases and his rent falls, proportionally. At the end, the buyer will own the property 100%. Doesn't it make you sick that a bunch of currency speculators (gamblers) dictate how much you should pay on your mortgage? I still remember when rates when from 10% to 12% and then to 15% all in a few hours - and that was painful!

Doesn't sound like a bad deal actually, a bit like part ownership/part rental. But unlike normal mortgages you get shafted as the interest in the biggest part at the begining of the mortgage. I think I worked out years ago, on a 25yr loan, half the capital is repaid after 17years, so you can see the loan is loaded in the borrowers favour.

I'm surprised many of us here can't see the difference, its like saying there's no difference between income and capital growth.

Reminds me when I was at school doing Commerce and being told the differences between a hire purchase vs loan agreements, ie who has legal ownership, consumer rights, etc. Seems like either we don't want to know or everyone's becoming racist these days - I hope its the former..

[The Lone Gunman]

<snip>Seems like either we don't want to know or everyone's becoming racist these days - I hope its the former..

The point is that the Koran is a guide to how Muslims should live and it is not interest but "usury" that is prohibited under Islam. Usury is defined as charging a fee for the use of money.
Which ever way you spin it bank charges amount to usury in the spirit of Islam.

Muslims are so willing to find detours round the Koran when it suits them but will not budge on other interpretive issues.

[Fleetwood]

Firstly, the bank has to shell out 200k so it owns the property. In this way, the bank is forced to lend responsibility as it has a property risk/exposure, so no more mortgages at 10x earnings, to grads!

?????
Bulltulip. The bank "shells out" 150K in my example, not 200K as you say.
It has the same "property exposure" as in a non-Sharia loan, as the money is secured against a property of identical value in both cases.
In my example, the bank nominally "lends" the Mussie punter 200K to buy the property. This is effectively in a fixed-rate (nearly said "interest" there, sorry) loan.

If you click on the second page of the second link, you'll see that the "rental" part of the "deal" actually varies at 1.19% over the LIBOR.
Now, BC, if you work in the City, you'll know what the LIBOR is. Doesn't it have something to do with interest?

[oraclesmith]

How would capital appreciation work though. Say I have one of these arrangements and I have 50% equity in the property with the bank having the other 50%. If I wanted to sell the property (a) would the bank have any sort of say in the matter and (b) would it profit from a 50% stake in the resale value or just 50% of the original loan ?

[gingerjedi]

I'd like to get Sharia compatible credit card with very high spending limit.

You would never use it.

AtW: I would like that £50 pair of shoes please.

Shop keeper: Yes sir that will be £90 please.

AtW: Aye??

Shop keeper: That’s £50 + the little extra we don’t like to talk about, would you like a bag?

Atw: Feck off!

[Fleetwood]

a) Possibly
b) They own 50%. Remember, this is a "partnership" between you and them, so presumably, they would get some of the increase in value, but I don't know for certain.

[oraclesmith]

If it's an equity share in the property itself rather than the original loan then presumably they could take some pretty chunky hits if punters decided to quit an imploding market like some did in the eighties ?

[Fleetwood]

Well, yes and no.
It would depend how much of the "loan" had been paid back, compared to how much they originally lent, taking into account how much they'd made on the "rental".

How many banks and building societies went bust during the last property crash? None, IIRC. These guys have the same exposure as in a normal loan.
They lend an amount a against the value of a property p. They just have different words to describe what they're doing.

[The Lone Gunman]

If it's an equity share in the property itself rather than the original loan then presumably they could take some pretty chunky hits if punters decided to quit an imploding market like some did in the eighties ?

I think you would still owe them the 200K that you borrowed.
They loan you 200K. They have a 90% share in the property. As you pay the loan off their share reduces. So when you have paid off 100K they own 45%.
If market collapses and you have to sell they own 45% plus the 100K you owe them.
I am guessing here.