Murabaha Mortgages – Lender Resells House
to Borrower
Murabaha
mortgagesare much less popular in the UK,
and very few Islamic lenders offer them.
The
main reason for this is that a very large initial amount of
capital is normally required by the borrower, and the lending
term is typically no more than 15 years, making it difficult
to afford for most borrowers.
Murabaha
mortgages work in this way:
You
find a property and agree a purchase price with the seller
You
then agree the loan required with your Islamic lender
Typically,
you will have to provide around a 20% deposit at this time
The
lender will then buy the property and immediately resell it
to you for a higher price
You
will then pay back the lender the resale price in fixed instalments
until you own the property completely
Typically,
a Murabaha mortgage will not extend beyond 15 years, so repayments
can be quite high
The
difference between the original purchase price and the higher
price at which the property is resold to you provides the Islamic
lender with a profit that is compliant with Islamic law.
