Islamic / Muslim Mortgages

Islamic / Muslim Mortgages

In the last five years, the provision of Islamic banking facilities, especially mortgages, has been a rapidly growing area. If you want to borrow money to buy a property while remaining in compliance with Islamic law, you will now find it much easier and cheaper to do so than you would have done five years ago.

This might be good news for you, or you might be wondering what makes Islamic mortgages different, and why they are needed. Read on for all the answers.


Why Do We Need Islamic Mortgages?

Under Islamic law (Sharia) the payment or receipt of interest (riba) is forbidden. Interest is seen as a payment that is unrelated to the value of the goods or assets being traded, and is considered sinful.

In other words, it is not permitted to make money just from lending money – some additional service has to be provided by the lender for them to earn their profit.

For many Muslims in Britain this has led to an uncomfortable position – they either have to live in long-term rented accommodation, whilst trying to save the entire purchase price of a house, or they have to compromise their beliefs and take out a UK-style interest-bearing mortgage. In recent years, the options for Sharia-compliant mortgages have improved considerably, meaning that many Muslims no longer have to make these difficult compromises.

Remember, it is perfectly acceptable for Muslims to make a profit by lending money, but this must be done based on goods or services provided, not simply by charging an arbitrary fee (interest) on the money lent. There are two main ways of providing mortgages that meet the requirements of Islamic law, and these are explained in detail below.


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