|
It is against Islamic law to pay or receive interest, this has been a huge
problem for Muslims living in Britain. When it came to home buying it was only
the very rich, who could afford to buy a home outright. Fortunately however
many banks and building societies are starting to recognise this as a problem
and are offering an alternative.
There are two options available to you that correspond with Muslim law:
-
The Murabaha (Deferred sale finance) Mortgage
-
The Ijara (lease to own) Mortgage
Islamic and Coventional Mortgages
Compared
|
Islamic Mortgage |
Conventional Mortgage |
| These are interest free and are called Murabaha, deferred sale
agreement and Ijara, lease to own. |
Funds are borrowed from the lender and interest is charged for the
duration of the loan. |
| Sources of income and credit references for the loan can be
re-examined before retirement age. |
Sources of income and credit references for the loan can be
re-examined before a 65th birthday |
| The property's value must be at least £50,000. |
Most lenders have no lower limit on the property's value. |
| Life and building insurance is not compulsory. |
Life and building insurance will be compulsory in most cases. |
| The bank owns the property immediately. |
The borrower owns the property not the lender. |
| Payment terms for the Murabaha is a minimum of 5 years and a maximum
of 15 years. The Ijara has a minimum of 7.5 years and a maximum of 25 years. |
Payment terms can be up to 40 years. |
| Funds available for a Murabaha are up to 2.5 time the annual income.
For an Ijara its up to 3 times the annual income of the sole applicant. |
The amount borrowed can be up to 5 times of the sole applicant. |
| An arrangement fee of 0.75% is payable on the property's value after
the first payment. |
An arrangement fee up to an agreed sum |
CALL: - 08704
10 11 12
Muslim Mortgages
Mortgages available through British financial institutions have always been
interest-based, something which does not comply with Islamic Sharia law, and as
such are largely unacceptable to Muslims and would be against their religious
principles.
Many Muslims in Britain, of which there are currently 4.5 million, find
themselves trying to balance their Islamic principles with the realities of the
British mortgage system, and often conclude they have no choice but to
reluctantly take out a traditional interest based mortgage.
Sharia-complaint products currently available in the UK are based on Ijara and
Murabaha methods:
The Murabaha Mortgage:
This is only really an option for individuals/families who have a fair amount of
capital behind them, because it is a condition of this Mortgage package that
you are expected to pay (circa.) 20% of your homes value, on the day of
purchase. However from that day the house will be registered as your own. You
may pay off any debt that is outstanding on your home at any point. This
package offers a fixed repayment period that is agreed between you and your
lender, any a monthly repayment amount that is fixed for the term of your
mortgage. So how does the Murabaha Mortgage work? When you find the house that
you wish to buy, you arrange a sale price with the vendor as normal, however
the bank pays the purchase price, then immediately sells the house to you at a
higher price (the higher price is determined by the original price of the
property, and the repayment period that you will have agreed with the lender),
minus the percentage you pay as deposit.
The Ijara Mortgage:
This is a slightly more popular choice of mortgage, as you do not need a large
amount of capital behind you to set up this mortgage, it is also slightly more
flexible than its counterpart. An extra benefit to this type of mortgage is
that it can even be taken out to replace an existing interest mortgage. The
amount you pay each month is usually fixed yearly. The outstanding balance can
be paid off at any time (usually) without incurring any penalties.
So how does the Ijara Mortgage work? As with the Murabaha mortgage, you find a
property that you wish to buy, and agree a purchase price with thevendor, the
difference is that; your lender will then purchase, and gain ownership of the
property. You will enter into a lease agreement with the lender. Each month you
will be expected to pay rent to your lender and a contribution towards the
purchase of your property.
If you have any further queries or for more information
and advice on these any other type of mortgage just
fill out our QUICK ENQUIRY FORM or speak to one of our
advisors at ~ 08704 10 11 12
|
