They pay interest without paying interest. Let's say the house costs $100,000. The bank buys the house for $100,000 and puts it in a trust. The "occupant" buys the house for $150,000.  150 monthly payments of $1000 at 0% interest. The spread is the interest.  It's just that instead of borrowing the present value and paying interest on the value due, you're borrowing on the future value and not paying any interest at all.