Interest-Free Home Loans... Possible?
The Muslim community’s belief of not taking and giving interest, as it creates an imbalance in the society with the rich getting richer and the poor getting poorer, has given rise to a dilemma for Muslims living in New Zealand. Should they compromise on their faith and opt for home loans on interest from national banks or should they not buy a home at all?
Sara Jawaad has been living in New Zealand for the past 10 years. A former dental therapist and hygienist by profession in Pukekohe, she is currently teaching alternative education in college and resides in Manukau.
Sara, who has a big family comprising of her husband, two kids, sister and parents, is struggling to find an avenue that will provide her with an interest-free home loan so that she does not have to compromise on her faith. The only option open to her is if the bank buys the house on profit, so they own the house and resell it again on profit. In this scenario, the bulk payment is subtracted from the original selling price and the balance can be paid in regular instalments.
This scheme of buying house and using the profit as interest is not prevalent in New Zealand but is practised in Australia, the US and UK.
In her research Sara found that this finance model was practiced in New Zealand by few small firms in 2006 and 2007 but none could survive the global recession.
The couple is looking for a similar alternate medium of getting finance. They have put forth their application in BNZ, ASB and Westpac hoping for an authorisation of the finance model, but they haven’t received a response from any bank yet.
“It has almost been a year since I started applying but whoever I speak to would refer me to the next person.”
They also came across the Amanah Saver Scheme that was recently introduced in New Zealand mostly for the Muslim community.
“In Amanah, the money is invested in halal trade and it grows, so they are considering of providing options to buy houses for Muslims. But they need to grow their business with Kiwi Saver first, so they need more people to join in Kiwi Saver, invest in their money and that will generate an income that will provide a base to buy houses and sell it to the Muslim community. But that is a long-term proposal and it will need a lot of commitment from the community to change their Kiwi Saver and there is a long wait,” says Sara.
Sara further mentions that she knows many others from her community who have taken house loans on interest because they were left with no choice. She is seeking an option where she doesn’t have to choose between her faith and financial stability.
There are different models that can be applied such as a trust where everyone contributes and a house is purchased. One family occupies the house and their contribution gives them their share of the house. The rest is owned by the remaining membersof the trust. The occupant family pays the rent and eventually when the full value of the property is paid, the ownership is transferred to the occupant and the money collected can be used to fund another house.
“It is like renting your own house for some time until the full value of the house is paid and then the house belongs to you,” says Sara.
“We are using examples from around the world. We have lawyers, accountants and financial advisors and we are trying to formulate something so that families such as mine can afford to buy house in the future with different schemes and not just on loans with interest.
“The important thing to consider is that the Muslim population is increasing and they will have to own a house eventually, so why not adopt or introduce a method to cater to their needs? After all, they too are paying their taxes in due time and they are as much citizen of this nation as anyone else,” concluded Sara.
The Muslim community’s belief of not taking and giving interest, as it creates an imbalance in the society with the rich getting richer and the poor getting poorer, has given rise to a dilemma for Muslims living in New Zealand. Should they compromise on their faith and opt for home loans on...
The Muslim community’s belief of not taking and giving interest, as it creates an imbalance in the society with the rich getting richer and the poor getting poorer, has given rise to a dilemma for Muslims living in New Zealand. Should they compromise on their faith and opt for home loans on interest from national banks or should they not buy a home at all?
Sara Jawaad has been living in New Zealand for the past 10 years. A former dental therapist and hygienist by profession in Pukekohe, she is currently teaching alternative education in college and resides in Manukau.
Sara, who has a big family comprising of her husband, two kids, sister and parents, is struggling to find an avenue that will provide her with an interest-free home loan so that she does not have to compromise on her faith. The only option open to her is if the bank buys the house on profit, so they own the house and resell it again on profit. In this scenario, the bulk payment is subtracted from the original selling price and the balance can be paid in regular instalments.
This scheme of buying house and using the profit as interest is not prevalent in New Zealand but is practised in Australia, the US and UK.
In her research Sara found that this finance model was practiced in New Zealand by few small firms in 2006 and 2007 but none could survive the global recession.
The couple is looking for a similar alternate medium of getting finance. They have put forth their application in BNZ, ASB and Westpac hoping for an authorisation of the finance model, but they haven’t received a response from any bank yet.
“It has almost been a year since I started applying but whoever I speak to would refer me to the next person.”
They also came across the Amanah Saver Scheme that was recently introduced in New Zealand mostly for the Muslim community.
“In Amanah, the money is invested in halal trade and it grows, so they are considering of providing options to buy houses for Muslims. But they need to grow their business with Kiwi Saver first, so they need more people to join in Kiwi Saver, invest in their money and that will generate an income that will provide a base to buy houses and sell it to the Muslim community. But that is a long-term proposal and it will need a lot of commitment from the community to change their Kiwi Saver and there is a long wait,” says Sara.
Sara further mentions that she knows many others from her community who have taken house loans on interest because they were left with no choice. She is seeking an option where she doesn’t have to choose between her faith and financial stability.
There are different models that can be applied such as a trust where everyone contributes and a house is purchased. One family occupies the house and their contribution gives them their share of the house. The rest is owned by the remaining membersof the trust. The occupant family pays the rent and eventually when the full value of the property is paid, the ownership is transferred to the occupant and the money collected can be used to fund another house.
“It is like renting your own house for some time until the full value of the house is paid and then the house belongs to you,” says Sara.
“We are using examples from around the world. We have lawyers, accountants and financial advisors and we are trying to formulate something so that families such as mine can afford to buy house in the future with different schemes and not just on loans with interest.
“The important thing to consider is that the Muslim population is increasing and they will have to own a house eventually, so why not adopt or introduce a method to cater to their needs? After all, they too are paying their taxes in due time and they are as much citizen of this nation as anyone else,” concluded Sara.
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