Zero Mortgage Canada and Halal Home Financing OptionsWritten by Chelby Daigle
Zero Mortgage Canada is a new company partnering with True North Mortgage (TNM) to give Canadian Muslims the opportunity for halal lifestyle.
Launching itself in the Canadian market as a Gold Sponsor at this year’s Reviving the Islamic Spirit Conference, Zero Mortgage Canada along with TNM hopes to offer competitive rates for its clients which are on par with conventional mortgages. Zero Mortgage Canada’s products are licenced for use in Canada through Zero Global Limited, based in Dubai, UAE, products are licenced for use in Canada through Zero Global Limited, based in Dubai, UAE.
Muslim Link had the opportunity to interview Omar Rahman, who helped to bring Zero Mortgage to Canada. The Toronto-based chartered accountant and graduate of the University of Toronto, also has an Islamic Theology degree from South Africa and is now a senior advisor and community liaison with Zero Mortgage Canada.
How did you get involved with Zero Mortgage Canada?
Many of my peers have dabbled in real estate, either settling into their dream homes or acquiring numerous profitable investment properties. Unfortunately, I have been limited in my pursuits of home ownership due to the prohibition of usury in our faith. I had heard about Islamic Finance in other Western countries and started researching the subject. I observed that Islamic Finance products in countries such as the US and the UK were making it possible for usury-averse individuals to acquire their own homes. I travelled to global Islamic Finance conferences, reviewed Islamic Finance products and developed a working relationship with key scholars such as Mufti Zubair Usmani, Dr. Aznan Hasan and Shaikh Nizam Yaquby.
A couple of my financial peers and I developed a product which will meet both Shari’ah conditions as well as the regulatory framework in Canada. We worked with the key scholars I mentioned earlier to devise such a product. Once the product was finalized we partnered with an established financial services company and that’s how Zero Mortgage Canada came to be.
Tell us how your organization has partnered with True North Mortgage
We can imagine how exciting yet nerve-wracking applying for home ownership may be and we were keen on developing relationships with partners with impeccable reputations nation-wide. After some market research, we met with True North, Canada's largest brokerage, and have partnered with them to distribute our product in their 10 branches across Canada. Clients can visit their branches and these wonderful experts will guide them through every step of the process.
For clients who prefer to handle their affairs from the comfort of their homes, they may call or email us and other leading brokerage partners will walk them through the process online, via phone and even in-person.
Your product is based on a diminishing return Musharakah contract. Could you explain how this works in Canada?
The first step is that the home owner and the financer agree to co-own a property based on the amounts in a legal contract. For example, with a 20% down payment, the homeowner owns 20% and the financer owns 80%. The second step is that the homeowner pays a monthly amount for use of the property, similar to a rent payment. Instead of the home owner receiving their share of the monthly payment, they use it to acquire the financer’s share of the property. Eventually, the homeowner will have made enough monthly payments to acquire the financer’s entire share.
The key areas in which our product is different is that instead of interest, a “home payment amount” is made on a monthly basis. Secondly, our partners have agreed to comply with all the Shari’ah conditions. Finally, we allow the home owner to utilize the property as they wish, including making home improvements. In fact, potential clients will be excited to hear about our willingness to finance certain home improvements.
What are the challenges of bringing new halal financing products to the Canadian market?
The challenges include regulations and competition. The first challenge is creating a product which meets both Islamic finance conditions and complies with Canada’s strict regulatory framework. On top of that, we have to be able to match the quality of service and the pricing offered by non-Shari’ah compliant sources of home financing.
With regards to the Shari’ah issues, two key rules in Islamic Finance are to avoid profiting from late payment fees and to avoid oppressing a home owner, especially one headed towards default. We worked hard to convince our partners to comply with these rules and in the end they have accepted our conditions. Of course, our product meets the regulatory and security conditions that mortgages from any Canadian bank are expected to comply with.
To match the quality of service, we partnered with highly regarded entities in both the initial application process and in the servicing of the home financing.
Pricing was the final challenge. On our side, we don’t charge any type of Shari’ah fees to our clients, not in the application process nor in the monthly payments. Additionally, our partner offers some of the lowest rates in the country resulting in a home ownership experience which rivals that of any other home financing option in the country, both in terms of service quality and in terms of cost.
As if the lower rates weren’t attractive enough, we offer our clients a “zero mortgage” option. Essentially, we allow them to allocate funds from their existing equity to help others acquire homes. The rates of return on these amounts are higher than the rates they are paying for home ownership. If they contribute enough equity, they can reduce their monthly payments all the way to zero.
How do you feel that your product competes with other halal home financing products available in Canada?
First of all, we respect and value all other teams offering halal home financing. From a strategic perspective, we believe our entry into the industry will only make the pie even bigger as we reach markets and clients who previously weren’t accommodated. Most importantly, our partners are willing to meet the strict Shari’ah conditions and have signed agreements to this effect. We are also the only Canadian entity that is Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) compliant and we meet the Shari’ah standard of a Shari’ah board approving our product. In fact, three leading Shari’ah scholars have approved our product such as Dr. Mufti Zubair Usmani who is the nephew of Mufti Taqi Usmani the current Chairman of AAOIFI.
Finally, TNM offer halal financing with similar prices and service quality as that of prominent non-Shari’ah compliant financing options. TNM meets the same regulatory and security conditions as a Canadian bank mortgage
If I am a usury-averse individual, I am attracted to Zero Mortgage and its partners as we are not only compliant with the strict interpretation of Shari’ah standards, but TNM are also cheaper and offer unmatched customer service.
Disclaimer: This promotional article was written as a partnership between Zero Mortgage Canada and Muslim Link. Promotional articles are designed to raise awareness about the products and services of a particular business to our readership. They do not equal an endorsement by Muslim Link or its staff of a particular business or any guarantees about its products or services.
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