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Home Financing Through Diminishing Musharakah

How does one finance the purchase of a home using Diminishing Musharakah?

Two partners, one a client and the other a financier, buy a home for $100,000. The client makes a deposit of $10,000 and lives in the home, while the financier invests $90,000. We assume that the two agree to the client paying a monthly rent as a percentage of the financier’s share. It is also agreed that every six months the client buys $10,000 of the financier’s share.

The rent can be pegged as a percentage where the rent is calculated as 1% of the financier’s share, or some other amount that reflects the client's increasing ownership. After 54 months, or four and a half years, the client owns the house entirely.

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