Islamic Finance/Halal Mortgages
The Islamic law of Sharia forbids the charging and paying of interest on mortgages, something which is commonplace in standard UK mortgages. This can provide difficulties to Muslims looking to purchase property in the UK, as most mortgage lenders do not work to Sharia law.
How does Islamic Mortgage Alternatives work?
Sharia Finance vs. Conventional Mortgages Explained
Sharia law prohibits interest-bearing loans. Interest is paid on traditional mortgages. Islamic banks have devised a programme known as the "Home Purchase Plan," or "HPP," to address this issue. Borrowers can now purchase a home without taking out an interest-bearing loan.
A Home Purchase Plan allows a purchaser to buy a home with the help of an Islamic bank while paying monthly rent on the portion of the home they don't own. Over time, the borrower's equity in the property grows, and you continue to pay rent instead of interest.
What are the different types of Islamic mortgages?
Sharia Finance / Halal Mortgages, also known as Home Purchase Plans (HPP), come in three varieties:
The diminishing musharaka structure is the most well-known in the UK, and you'll almost certainly be using it if you take out a Home Purchase Plan. The buyer and the Islamic bank jointly purchase the property under this structure, with the buyer making a deposit and the bank supplying the remainder. The buyer progressively repurchases the property from the bank by paying rent on the portion of the property owned by the bank at that moment.
Ijara is an Islamic financing system in which the bank or building society, funding the property purchase, buys the property and leases it back to you for a set monthly payment agreed upon by the parties.
The Islamic bank will acquire a property on the borrower's behalf and then resell it at a higher price under a murabaha framework. Murabaha Islamic house loans are commonly connected with buy-to-let property transactions in the United Kingdom.
Is it possible to get an Islamic mortgage if you aren't a Muslim?
Non-Muslims have the option of getting an Islamic Mortgage. If you want a more ethical approach to borrow and pay interest, an Islamic mortgage may be right for you. Islamic home purchase plans are often seen as ethical because you are aware of the whole amount you must pay before purchasing a property.
Islamic Mortgage Lenders
Islamic banks which offer home purchase plans to UK customers include:
• Al Rayan Bank
• Gatehouse Bank
• UBL UK
• Ahli United Bank
• ABC International Bank
Islamic Home Purchase Plans
An Islamic home purchase plan is a sharia-compliant alternative to traditional mortgages for people who want to buy a property to live in, switch mortgages, or release equity.
Islamic Buy to Let Finance
A Buy-to-Let purchase plan allows you to enter the property rental market as an investor or to diversify your portfolio. With low rates and an ethical attitude, this is a Sharia-compliant alternative to a traditional Buy-to-Let mortgage. You may use it to buy or refinance your home just like a traditional mortgage.
Islamic Commercial Property Finance
For both UK residents/entities and UK Expat/International residents, Islamic Commercial Property Finance provides an alternative to conventional commercial loans for those who wish to purchase their commercial property, switch their mortgage, or raise capital from the equity for Commercial Investment, Semi-Commercial, and Owner-Occupied purposes.
Islamic Bridging Finance
Whether it is a residential or a commercial property we can assist you with a sharia compliant, ethical, short term bridging finance solution tailored to you.
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