Sask. broker says halal mortgages are not a new concept in Canada

A Saskatoon mortgage broker says the federal government’s move to help Muslim Canadians get into the housing market by promoting halal mortgages is not such a radical idea — it’s helping families buy their first home without breaking their faith.

The 2024 federal budget included plans to introduce “halal mortgages” as a way to increase access to home ownership. Halal translates to “permissible” in English. The creation of this alternative financing product is a means to enable diverse communities to join the housing market.

“Under Sharia law, which is what most Muslims follow, you are not able to pay interest, which obviously doesn’t jive well with a mortgage or financial product that charges interest,” Saskatoon-based broker Conrad Neufeldt told CTV News.

This is a major barrier for those who follow the Islamic faith because interest is at the heart of the Canadian mortgage and housing system.

According to Neufeldt, there are three main types of Halal mortgages.

One acts as a rent-to-own agreement where the lender buys the property then essentially transfers ownership once rent fees are paid.

Another version is where the home is purchased in partnership with the lender, and they are co-owners.

The most popular, according to Neufeldt, is cost-plus financing — where the lender purchases the home and sells it back at an increased price.

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“They’d sell it back to you at a prescribed price so if the house was worth $1 million they buy it and sell it back to you at $1.6 million, so you wouldn’t be paying interest, but would be paying for the house at a higher price,” he says.

Neufeldt hasn’t personally heard of halal mortgages being utilized in Saskatchewan, but says they are nothing new in Canada, and are common in Ontario.

Canadian Bankers Association spokesperson Maggie Cheung told CTV News in an email statement that it’s a way to reach out to more Canadians interested in home ownership.

“Canada's banks are client-driven businesses and continually innovate to respond to evolving customer preferences. We continue to engage in discussions with governments and regulators as a matter of course to explore new ways to serve Canadians and better support the needs of all Canadians seeking to become homeowners.”

Neufeldt, who has been a mortgage broker for 10 years, says halal mortgages can mean more fees and penalties overall.

“I think some people think it’s free money, like the government is trying to give away free money. That’s not the case at all. Halal mortgages don’t have interest, but there’s still a cost. In fact, more often than not, halal mortgages are more costly,” he says.

Neufeldt doesn’t expect to see halal mortgages take off across Canada right away, as lenders will need to work out specifics first.