Ijarah Muntahia Bittamleek

A lease that ends in ownership, also called Ijarah wa Iqtina. The financier buys the asset (a home or car), leases it to the customer for a fixed term at an agreed rent, and commits through a separate promise to transfer title at the end, either as a gift, for a nominal price, or through gradual purchase during the term. During the lease the financier owns the asset and bears owner's risks such as uninsured loss, major structural repair, and property-level obligations, while the customer bears tenant-level costs and use.

It is the structure behind most U.S. halal lease-to-own home and auto financing, and AAOIFI Shariah Standard No. 9 governs it.

In U.S. practice, Ijarah Muntahia Bittamleek is what most halal 'lease-to-own' home and auto programs are. The provider (often through a trust or special-purpose entity) holds title, you sign a lease plus a separate purchase undertaking, and your monthly payment is split between rent on the provider's ownership and an acquisition payment that builds your equity. The two documents must stay separate: AAOIFI Shariah Standard No. 9 prohibits making the lease conditional on the sale, because that would turn one contract into two inside one agreement.

The owner's obligations are the test of whether a program is genuine. If the lease pushes structural repairs, uninsured casualty loss, and property-level risk onto you as lessee, scholars will say the provider is a lender in a landlord's clothing. On taxes, the IRS treats most of these arrangements as financing for the buyer, so the rent component is generally reported like interest on Form 1098 and may be deductible as home mortgage interest when the property is your residence; confirm with a tax preparer.

On early payoff, you buy the provider's remaining share at the schedule price; there is no unearned interest to rebate because none was charged.