In Line with your Faith
Shariah Compliant
A Shariah Compliant Mortgage is a loan which falls in line with Islamic Law, this means a 0% interest mortgage, as interest is forbidden in Islam.
An Islamic mortgage is a halal way of purchasing a property in the U.K. They are considered an alternative to conventional mortgages for Muslims seeking a Sharia-Compliant form of finance.
These mortgages are sometimes referred to as a Home Purchase Plan (HPPs).
Rather than fitting the classic definition of a mortgage they’re actually a business partnership between an individual and a bank or lender. There is a reason for this.
One of the guiding principles of Islamic faith is that making money from money is forbidden. The creation of wealth is permissible only if based upon fair trade where the risks and rewards can be shared. So, any form of finance which involves a requirement to pay interest on money borrowed – like a traditional mortgage – falls outside the parameters laid down through Sharia Law.
Different types of Islamic Mortgages available
Shariah compliant mortgages, are structured so that the bank or lending
institution still make money, but not in the form of interest. The bank or lender
will make money as profit or through charging rent when the bank or lender
owns the property or asset and having a solicitors firm knowledgeable is key. The
3 types of Shariah compliant Islamic mortgage are:
Murabaha
The Bank will buy the property and will sell it back to you on a
deferred basis.
Musharaka
The Bank will buy the property and grant you a lease. A Trust is created between you and the Lender.
With each payment your share in the property will increase until you have
bought all the shares in the property. The Lender will then transfer the legal title
into your name. This is the most popular form of Islamic finance today.
Ijara
The Lender will buy the property and grant you a lease for a term. Once
the lease period is completed the Lender transfers the legal title of your new
home to you. Please Note: Islamic mortgages offer an alternative financing structure for
muslims and people that require a Shariah compliant mortgage. It is not a 0% free
deal to buy your house for nothing.
We act for clients across the world on these and other finance matters.
There are a few shariah compliant lenders whom we work with closely so should
this be a requirement for you please don’t hesitate to contact us and we will aim
to find you the best product suited to you.