Assalamualaikum Shaykh(s), please advise if the following situation is permissible, jazakallahu khair!
In order to avoid getting a mortgage for a home, we have discovered the option of creating a holding company (Hold Co.) and funding it with a loan from our professional corporation (Prof. Co) at 1% interest, we have had this plan reviewed by financial advisors as an acceptable legal way to do it. Our concern is the 1% interest that technically we would pay ourselves.
The mechanism is: Prof. Co will lend Hold co. cash at 1% interest and Hold Co. will purchase the home. My spouse and I will rent the home form Hold Co. paying fair market rent to it.
My Spouse and I are directors of Prof. Co. (along with 2 parents) and we would be the directors of Hold Co.
Hold Co. would pay dividends to my spouse and I and Prof. Co. is paying dividends to us and 2 parents as well. Our concern is eventhough my spouse and I are directors of both corporations and essentially paying interest to ourselves, is this allowed?
also does it matter that Prof. Co. has 2 additional directors (the 2 parents) or does Prof. Co and Hold Co. need to have the exact same directors for it to be allowed.
background:
The rationale for doing this we can not afford a home with our current savings but what we have earned in our own professional corporation we can, unfortunately if we would take our money directly out of the professional corporation as a salary it will be taxed at close to 50% resulting in the same situation of not being able to afford a home which is a need at this point not just an investment.
Also just a note at this point 100% of the cash coming into the Prof. Co. is from our wages.
really appreciate your input jazakallahu khair!