Are Mortgages Haram? What Muslims in Canada Need to Know

Specialty Programs
Written By Jeff Dinsmore

Let’s not sugarcoat it.
Most traditional mortgages are considered haram in Islam.

They’re built on interest, structured to profit from lending money, and they violate the core principles of Sharia-compliant finance.

And yet... Muslims in Canada still want to buy homes, build wealth, and protect their families. The question is: Can you do that without compromising your faith?

Let’s break it down.

Why Are Mortgages Considered Haram in Islam?

Islamic finance prohibits riba, which means the collection or payment of interest. So basically, anything relating to interest is a no go.

That means:

  • You can’t lend money and profit from interest alone

  • Transactions must involve real assets and shared risk

  • Financial dealings must be fair, transparent, and ethical

A traditional mortgage in Canada involves borrowing money from a lender, then paying it back with interest over time. That interest is the lender’s profit. It’s how they make money.

Under Islamic law, this structure is viewed as exploitative and non-compliant with Sharia guidelines from top to bottom. For this reason, most Islamic scholars consider conventional mortgages haram.

Halal Mortgage Options in Canada: Do They Exist?

Yes - and this is where things get interesting for Muslim homebuyers.

Some Canadian lenders now offer halal mortgage alternatives, also called Islamic mortgages or Sharia-compliant home financing - or more colloquially, Halal Mortgages.

These aren’t just conventional loans with a different label. They’re built from the ground up to meet Islamic principles and are reviewed by qualified Sharia scholars. Most lenders even have seals of approval from the Shariyah Review Bureau in Bahrain (think - ethical BBB related to compliance to Sharia law).

Here are the most common halal mortgage structures:

1. Murabaha (Cost-Plus Sale)

The lender buys the home, then sells it to you at a marked-up price. You pay that agreed-upon price over time - no interest, just a fixed profit built into the sale. The lender gets the profit from the difference of their purchase price, and the price that they sold the home to you for. Transparent, clear, and agreed upon by both parties.

2. Ijara (Lease-to-Own)

The lender buys the home and leases it to you. You pay rent while gradually buying out the lender’s share. At the end of the term, the property becomes fully yours.

3. Musharakah (Co-Ownership)

You and the lender buy the home together. You pay rent on their share while increasing your ownership over time - until the home is fully yours.

Generally, the Murabaha structure is the most common, however they are all possible through these specific lenders.

At the end of the day, the goal with all of these structures is the same:

  • Avoid interest

  • Share risk

  • Tie payments to real assets instead of debt

What Makes These Islamic Mortgages Halal?

The key difference comes down to intent, structure, and Sharia oversight.

Some of the lenders we work with offer halal mortgage structures that have been carefully reviewed, both by Islamic scholars and Canadian legal teams.

Here’s what they typically include:

  • You hold legal title to the home from day one

  • Payments are fixed - not interest-based

  • Prepayments are allowed, with clear and transparent terms

  • Everything is structured to meet both Islamic finance principles and Canadian mortgage regulations

This isn’t a loophole. It’s a regulated, legitimate alternative built for Muslim Canadians who want to own property without violating their values.

But Is It Really Halal - Or Just a Repackaged Mortgage?

This depends on your interpretation - and who you ask.

Some scholars fully support these models. Others feel they resemble conventional interest under another name.

That’s why we always recommend:

  • Learn how these structures work (you’re doing that now - excellent first step!)

  • Review the contract details

  • Talk to your imam or religious advisor for personal guidance

This is your call - and it needs to feel right both financially and spiritually.

My Take as a Mortgage Broker

You don’t have to choose between your faith and your financial future.

You can be devout and build wealth.
You can own property without compromising your beliefs.
You just need the right structure - and someone who understands how to find it.

Halal mortgages aren’t perfect, and they aren’t available through every lender, but they are real. And if staying within Sharia-compliant principles is important to you, they’re worth exploring.

Final Thought

If you’ve ever wondered whether a mortgage is haram, you’re not alone.

The truth is, most mortgages in Canada are interest-based. But that doesn’t mean you have to abandon your homeownership goals.

Halal mortgage options in Canada are becoming more accessible. They offer a path that aligns with your values, without asking you to compromise on your future.

Want to explore what’s possible?

Ready to Take the Next Step?

✅ Start your halal mortgage pre-approval
📞 Book a discovery call

Want a mortgage that works for your life - and your faith?
Let’s make it happen.

Jeff Dinsmore
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