Works like this:
Muslim finds a house for sale; price $100K
goes to bank and strikes a deal with or without down payment.
Bank buys house for 100K and leases to Muslim.
Muslim pays bank $1000.00 a month rent of which $278.00 is set in savings for the Muslim.
Muslim pays for 30 years and the house is his.
The bank has recovered its 100K from the savings account, has had the tax write off for the house for 30 years and has a significant proffit from the actual $722 rental it received.
The proposition is on the order of a contract for deed or a very prolonged lease with purchace option.
People were paying toward a house. But if they missed a payment the deal was off. The Clintons kept all the payments *AND* owned the house. To be fair to the Ann Arbor bank, I'm not convinced that their Muslim banking program is as unethical as the Clintons' behavior at Whitewater.
If it is treated as rent, I guess the "renters" have no mortgage interest deduction for income tax purposes.
The bank buys the property and then immediately sells it at a higher price. The "down payment" comes as the first payment.
http://www.freerepublic.com/focus/f-news/1550602/posts?page=21#21
I don't know how the contract deals with sales and/or prepayments.