Quote:I referred to a conventional loan initially, and loans in general with my second example. There are programs out there linked to FHA and VA loans in which someone with no credit can receive a mortgage. Those programs generally do not exist with conventional loans, so good luck to someone with no credit who wants one of those.

 

It's not subsidizing a belief system if everyone, regardless of beliefs, is eligible for sharia-compliant loans. It would just be a new home loan product.

 

That said, I just thought of a potentially fatal flaw for sharia-compliant loans as we've envisioned them here. Typical loans have their outstanding value figured only by principal, with interest not factored in. That's how you can refinance or sell your home long before the 30 years are up; the amount in principal that you still owe on the house is probably much lower than the sale price or refi value of the home.

 

Take that over into a sharia-compliant loan, and you're underwater from day one through the final years of the loan. Because all the interest is figured up front into the principal, a bank would essentially be writing you a $350k loan for a $200k house. It's all principal, not just the value of the home. With that dynamic in play, the homeowner would never be able to sell the home because of the massive disparity between what they owe and what the house is worth, and refinancing would also be almost impossible. The refi lender would have to write the bank a check for far, far more than the house is worth to buy out the loan, and that's corporate suicide in the making. Based upon the problem of turning all the interest into principal, I now believe that sharia-compliant loans are impossible unless lenders are forced to fundamentally rethink how home mortgage loans are handled. I don't think that's time and money worth wasting, tbqh.

 

Another very good point brought up.  I just don't see how this could be a good thing for either side (lenders or buyers).  However, it would "show" or "prove" that the U.S. is "PC" and all inclusive with regards to one segment of the population that is perceived by many in our population as being "hostile" towards us.

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