CANADA ISLAMIC MORTGAGE WITH NO RIBA

In Canada, Islamic mortgages are structured differently than conventional home loans, instead of lending money and charging interest, the financial institution uses trade, leasing, or partnership models that generate profit in a halal way.

The ethical advantage of a Canada Islamic mortgage is that it creates fairness, risk-sharing, and clarity and the bank must take ownership of the property before reselling or leasing it, which introduces an element of shared responsibility.

Which types of halal mortgages are available in Canada and how do they work ?

In Canada, Muslims who want to buy a home without Riba (interest) can access halal mortgages through Shariah-compliant financing companies. These are not structured as “loans with interest” but rather as trade, leasing, or partnership agreements. Here are the main types and how they work:

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1. Murabaha (Cost-Plus Sale)

• The financier buys the property the client wants.
• It then resells it to the client at the purchase price plus a known profit margin.
• The client pays back the total price in fixed installments.
• ✅ Example: If a house costs CAD 400,000, the financier may sell it for CAD 440,000 payable over 20 years. The markup is profit from a sale, not interest.

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2. Diminishing Musharakah (Declining Partnership)

• The buyer and financier jointly purchase the home.
• The buyer makes monthly payments that consist of:
  • Rent for the financier’s share, and
  • Equity buy-out to gradually acquire more ownership.
• Over time, the buyer fully owns the home, while the financier exits.
• ✅ This model is very common in Canada because it resembles conventional mortgages but remains Shariah-compliant.

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3. Ijara (Lease-to-Own)

• The financier buys the property and leases it to the client.
• The client pays monthly rent plus contributions toward eventual purchase.
• Ownership transfers to the client at the end of the lease term.
• ✅ This is similar to rent-to-own models and ensures payments are for rent + asset transfer, not for borrowing money.

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4. Qard Hasan (Interest-Free Loan) (rare in Canada)

• A small number of cooperatives or community organizations may provide benevolent loans without profit.
• These are usually short-term or for small amounts (not full home purchases).

Are the criteria and conditions to get approval for an Islamic mortgage different than the one applying to conventional home loans in Canada ?

1. Similar Core Eligibility Criteria

Islamic mortgages in Canada generally require the same basic documents as conventional home loans: proof of income, employment verification, residency status, credit history, and a down payment. Lenders still need to ensure you can afford repayments, so financial stability is checked in both systems.

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2. Key Differences in Conditions

Where they differ is in the structure and compliance requirements:

• Sharia compliance: Islamic lenders must ensure the financing avoids Riba (interest). This means instead of charging interest, they use Murabaha (cost-plus sale), Ijara (lease-to-own), or Musharakah (co-ownership).
• Property restrictions: Some Islamic mortgage providers may not finance properties tied to activities considered haram (e.g., buildings leased to businesses selling alcohol, gambling, or adult entertainment).
• Profit vs. interest: Your monthly payment is not labeled as “interest” but as part of a profit or rent structure tied to asset ownership.

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3. Down Payment and Affordability

In Canada, both Islamic and conventional mortgages usually require a minimum down payment of 5%–20%, depending on the property price and your credit profile. However, some Islamic finance providers may require higher deposits (closer to 20%) to reduce risk since their models avoid traditional interest-based structures. Affordability tests (income-to-debt ratio) are applied in both cases.

Which Islamic mortgage lenders are available currently in Canada ?

Here’s an updated breakdown of Islamic (halal) mortgage providers in Canada, organized by region and backed by sources:

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Islamic Mortgage Providers in Canada

Manzil

• Structure: Offers co-ownership models—Murabaha and Diminishing Musharakah.
• Regions: Primarily Ontario, British Columbia, and Alberta, with plans to expand to other provinces.manzil.ca

Eqraz

• Structure: Murabaha-based halal mortgages (cost-plus sale).
• Regions: Available in all Canadian provinces (except Quebec).EQRAZ

Canadian Halal Financial Corporation

• Structure: Offers both Murabaha and Diminishing Musharakah financing.
• Region: Based in Alberta.Canadian Halal Financial Corporation

Servus Halal (Servus Credit Union subsidiary)

• Structure: Murabaha (cost-for-profit) mortgage structure.
• Region: Alberta—launching its halal mortgage product in Fall 2025.servushalal.ca

Citadel Mortgages (in partnership with Eqraz)

• Structure: Murabaha-based halal mortgage.
• Regions: Operates nationwide across provinces including Alberta, BC, Manitoba, New Brunswick, Ontario, Quebec, and more.Citadel Mortgages

IjaraCDC Canada

• Structure: Ijara-wa-Iqtina (lease-to-own) financing.
• Region: Offers services across multiple provinces.