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Last Updated: 4/6/2018

Shariah Compliant Home Financing

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​A Shariah Compliant home financing mortgage is often structured using "cost plus profit" components, instead of the "principal plus interest" components that are traditional in Minnesota Mortgages.

With Shariah Compliant financing, if the total of the "fully amortized" payments (i.e. cost plus profit) is stated in the mortgage instead of just the cost amount, MRT would unnecessarily be imposed on the profit.

Example: 

​Loan Amount ​$100,000
​Interest Rate ​6%
​Term ​30 Years
​Total Payments (Principal/Interest) ​$215,830
 
Stated Debt Amount ​MRT
​Traditional Mortgage ​$100,000 ​$230
​Shariah Compliant Instrument (Cost + Profit) ​$215,838 ​$496

Recommendation

To avoid the payment of MRT on the profit portion of the loan Form MRT-1 (Box 2) should state the cost amount being secured by the Shariah Compliant mortgage at the time of recording.