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Understanding Islamic Home Financing: A Review of Guidance Residential

DESCRIPTION OF EPISODE

I have critically reviewed Guidance Residential, the leading U.S. Islamic home financing provider, which advocates for its Sharia-compliant "Diminishing Musharakah" co-ownership model.
In this model, the homebuyer and Guidance Residential co-own the property, with the buyer gradually purchasing Guidance's share while paying rent for the portion of the house they don't currently own.
My observation is that merging a promise to purchase an asset with a rental agreement on the same asset is, in practice, no different from securing a conventional loan with interest, which Islam forbids.
I question Guidance Residential’s touted benefits such as co-ownership, being riba-free, having capped late payment fees, non-recourse commitment, risk sharing, and an independent Shariah board.
I have provided a comparison table illustrating the many similarities between the Diminishing Musharakah model and a traditional mortgage; the primary difference seems to be in the terminology used - substituting 'interest' with 'rent'.
I have extended an open invitation to anyone from Guidance Residential or the 18 law firms they collaborated with to engage in a discussion on my assertions, underscoring that my intention is to remain honest and not to personally attack anyone involved with the company.

TIMESTAMPS

Intro 0:00
What is Reba 1:50
How does Reba work 2:36
Co-ownership 5:39
Reba Free 6:47
Non Recourse 7:57
Late Payment fees 8:53
Risk Sharing 9:22
Affiliation 11:22
Equity Partnership 12:00
Freddie Mac 12:22
MJA 13:05
LLC 13:32
Sharia Compliance 16:30

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salam@practicalislamicfinance.com

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Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your own due diligence before making any investment decisions.