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Opinions on HSBC Sharia criteria

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HSBC Sharia criteria?

Amanah Home Finance is based on the Diminishing Musharaka mode of financing


The Bank's will purchase the property and then the property will be leased to you for the financing term and you will pay rent. You choose the property you want to buy and make an application. If you meet the criteria, financing will be agreed, then the following steps will take place: On completion, the property will be held in trust by HSBC Trust Company for each of the shares in percentage of the contribution to the purchase price, e.g. 10% for you if you have paid a 10% deposit and 90% for us if that is the amount of financing we have provided.

HSBC Trust Company as trustee will lease the property to you for the financing term. HSBC solicitor will register ownership of the property and the Trust Deed. Your solicitor or other legal adviser will register your ownership of tenancy in your name. You’ll need to make a monthly Amanah Home Finance payment to HSBC for the term of your finance. Your payment will comprise: rent, contribution payment and Charges, if applicable (any other sums payable for a leasehold property and buildings insurance if arranged by the bank).

For each monthly payment that you make you will pay the bank rent for the use of HSBC share of the property and acquire an additional share for yourself. At the end of the agreed term, and when all payments have been made, you can exercise the promise to sell and HSBC will transfer the property to you. You can also purchase our interest in the property from HSBC by exercising the promise to sell at anytime during the term of the finance.

Minimum deposit requirement, 10%,

Payment terms, Up to 30 years,

Income Multiplier, Applicants can make one application - i.e. potentially 6 incomes can taken into account when assessing an application. Salary multiples are not used but affordability calculated using customers earnings and outgoings.
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Interesting concept: Islamic finance. According to this article, Islamic-focused banking may be coming to Ontario soon:

In fact, a firm has been offering Islamic mortgages for a number of years now:
Do you guys think Islamic Finance superior to regular finance?

I feel it is the same, but structured differently. From what I read, Islamic Finance mortgages cost more than regular mortgages when compared side to side.
Being a Muslim who has researched these topics I'm farily well versed in them.

As a background: the key problem with western finance systems for Muslims is the interest based system (affects everything I know). However, one of the really unavoidable parts is a mortgage. In Islam you are not allowed to "buy" money from somebody at a greater price even if it is over time.

You ARE allowed to buy a product from a person over time at a greater price than if you were to pay it cash considering that the payments and term was fixed from the start.

Leasing is not a problem, so something structure as a 1$ buy back works generally.

The Islamic Mortgage solution is basically rent sharing as described in the link

The main pragmatic differences are:
a) What do you set the rent of the property at? If you are paying the rent of the 85% of the property on average over the first few years then you may not have much to spend to increase your ownership
b) No foreclosure, technically the asset should be sold and everybody paid their % ownership at any given time.

I guess the idea of whether it is cheaper is a function of interest rate vs rent value.
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