Guidance Residential

Islamic home finance is completely different from a mortgage loan because it is not a loan at all. Instead of a lender/borrower arrangement, Guidance Residential and the home buyer purchase the home together as co-owners. This creates a much more equitable arrangement that does not involve interest, or riba, which is prohibited in Islam.

Scholars agree that a mortgage loan is not an acceptable way for a practicing Muslim to finance a home. In a loan transaction, the lender provides funds to the borrower in exchange for a repayment of the funds in the future plus interest – essentially selling cash now for more cash in the future. The buyer repays the money with added interest, or riba, which is prohibited in Islam.

To provide an alternative to a mortgage loan, Guidance Residential developed a co-ownership model of Islamic home financing. Rather than lending money to the home buyer, Guidance Residential uses its funds to purchase a share in the property. Guidance and the home buyer purchase the home together as co-owners, a much more equitable arrangement. And no riba is involved.