A
mortgage made according to the sharia, or Islamic law, which forbids the payment or receipt of
interest. An Islamic mortgage may be an interest-free loan, but often it is a more complex
transaction. For example, a
bank could
buy a
house for
cash and then re-sell it to the "
borrower" for a
profit through
amortized payments such that the profit is the same as the bank would have made had it extended a regular loan. Other types involve the bank becoming a partner with the "borrower" so that both co-own the house or business, a scenario in which the borrower gradually
buys the bank's share of ownership with a series of payments.