This extra cost is due to land transfer and capital gains taxes incurred by a properly structured Diminishing Musharakah mortgage.
Due to this, the APR of a Diminishing Musharakah mortgage rises to 6.132% compared to 5.490% for EQRAZ.
Commodity Murabaha based
Co-ownership based
Cumulative tax costs of a Diminishing Musharakah mortgage
Breakdown of the Diminishing Musharakah customer's recurring tax obligations: Land Transfer Tax (LTT) on annual aggregate equity transfers and Capital Gains Tax (CGT) on the appreciation gains, accumulating year by year. Hover any point to see LTT, CGT, and the running total. Tawarruq customers pay neither.
Year-by-year breakdown
Show schedule ↓
| Starting Balance | Equity Transferred | Ending Balance | Property Value (EOY) | Year LTT | Year CGT | Cumulative LTT+CGT |
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How the calculation works
Land Transfer Tax (LTT)
Calculated annually on the aggregated equity transferred during the year, valued at year-end property price. Bracket-by-bracket lookup using the customer's province (Toronto and Montreal include municipal LTT).
Capital Gains Tax (CGT)
Each monthly equity transfer realizes a capital gain equal to the appreciation on that share. Yearly CGT is computed by stacking the taxable gain on top of base income and integrating the marginal income-tax rate over that range. Federal inclusion rate held at 50% throughout, consistent with the cancellation of the previously proposed two-thirds rate on gains above $250,000.
Why Tawarruq has zero tax drag
A Tawarruq mortgage produces a single secured obligation on a single mortgage charge. The customer purchases the property once, registers ownership once, and pays LTT once at closing — identical to a conventional mortgage. There are no further property transfers triggering tax.
Excluded from above APR calculation
Closing and legal costs, broker fees, property tax, and home insurance; these will impact the APR % for both compared products identically.