Dear Rabbi,
I took out a mortgage loan to be used for a family member where he pays the monthly payments. I was told that I will need a Heter Iska, since I am the one that pays the amount on the bill then he pays me back what I have already paid. He is not paying off the balance just paying the interest. The Heter Iska that I found online is only for business partnerships. Is there one that I can use?
Answer:
It is correct that the agreement requires a heter iska. This is because the money you received is considered a loan from yourself to the family member in question, and his payment of interest to you, or to the bank, is therefore ribis and forbidden. The heter iska, which defines the transaction between yourself and the family member as a business investment, must be made before you give hand the money over to him.
The heter iska, which turns the loan into an investment agreement, would be worded as follows (reprinted with permission from Beis Din Meisharim and Artscroll/Mesorah):
I _______[Borrower–Recipient], have received $_____ [sum] from _______ [Lender–Investing Partner], for investment in an iska partnership, subject to the following terms:
1. Partnership
In exchange for the money received, I hereby assign to the Investing Partner a share (in the value of the money received) in all investments, businesses, and real estate that I own. If I identify a specific investment that I believe will be more profitable, I shall transfer and assign to the Investing Partner a share of that investment. The Investing Partner shall pay one dollar for my services during the term of the iska
2. Profits and Losses
(a) Any profits, capital gains, or losses arising from this investment shall be shared equally between the Investing Partner and the Recipient.
(b) Any claim regarding the amount of profits generated by this investment shall be verified under solemn oath, administered by an Orthodox Jewish Court of Law.
(c) Any claim of loss must be verified thorugh the testimony of two qualified witness before an Orthodox Jewish Court of Law.
(d) It is agreed that if I return the principle of this iska, and in addition, pay to the Investing Partner the amount equal to a _____ [amount of interest] percent annual return as payment for his share of profits, I will not be required to take an oath, nor will I be required to notify the Partner the profits that were realized. Additional profits, if any, shall be my sole property.
3. Miscellaneous
(a) This iska shall be returned by _____________ [due date]. In the event any payment is not made by the due date, the money shall be reinveested under the terms of the iska.
(b) This agreement supercedes any other agreement between the two Parties in regatds to these funds.
4. Dispute Resolution
All disputes that may arise regarding or associated with this Agreement shall be resolved and established exclusively by binding arbitration at the _______________ [name of mutually agreed Beis Din], or its designess. Judgment rendered by the aforesaid authority may be entered in any court having jurisdiction thereof. The non-prevailing Party shall by liable to the prevailing Party for all costs and expenses related to any dispute resolution proceeeding, including reasonable attorney’s fees.
This agreement shall follow the guidelines of heter iska as explained in Sefer Bris Yehudah. This Agreement is intended to be, and is, binding, consistent with the binding nature of all agreements, documents, obligations, and acquisitions that are properly effected in a Jewish Court of Law in accordance with the laws and rules established by Rabbinical authorities. A proper kinyan suddar was executed to created this partnership. This is all valid and in good standing.
We hereby affix our signatures on this ______ day of ________ 20__ [Date].
__________________ ______________________ [Signatures]
All this was done in front of us, the below signatories, and we signed at the direction of the Parties.
__________________ _____________________ [Witnesses]
