PunishedD, 4 months ago

@YeetLibs That's like Islamic banking. Both religions ban interest, so lenders have to structure a traditional mortgage to avoid it.

But banks are banks, they aren't handing out free money. If you read the 2nd part, someone who takes out a zero-interest loan like this doesn't get to "own" the house like you do with a mortgage. Instead the homeowner and the bank form a partnership, and as the homeowner pays the bank, they own a little bit more of the home.

If you default on a mortgage, you're out of the house and the bank gets 100% of it. If you "default" on this kind of loan, you split the ownership, but the bank has first claim usually. And if you sell the house for more than you bought it, the bank gets a cut of the profit; you can't just pay off the mortgage and pocket the difference. But if you sell it for less, you still owe the difference.

If the bank is doing it right they'll also jack up the up-front price of the house, same as any other zero interest loan (putting the interest into the principle). But I don't know the specifics of how that's calculated in Rabbinic finance.