Mortgage

A mortgage (literal translation: "death pledge") is a device developed in the common law world, whereby the ownership of property is passed from one person -- the mortgagor -- to another -- the mortgagee -- in return for the loan of money. The mortgagee is prevented from exercising his rights of ownership by the rules of equity so long as the interest on the loan is paid.

Dutch mortgages

Dutch banks often adopt a scheme that could be considered the very opposite of the islamic one. In a so-called "aflossingsvrije" mortgage, the homeowner only pays the interest, but never pays any of the mortgage sum back. Instead, s/he pays some monthly sum into a savings account ? which becomes part of the collateral ? and uses the contents of this savings account to pay off the entire debt at once when the amount of money in the account equals the mortgage sum. This exceedingly contrived construction exists only because it ends up creating a larger deductible on the homeowner's income tax. Variants exist where a share account or a life insurance is used instead of a savings account.

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