Shariah Compliant / Islamic Mortgages

Enabling you to invest in residential property in line with Shariah principles

Are you looking for property financing that is Shariah Compliant? Some people refer to this as a halal mortgage.
Historically, property financing options for Muslims in the UK and beyond who want to buy or invest in property has been limited. However, in the last few years, an increasing number of options are available for those who are looking for Shariah Compliant Finance.

The main difference between Islamic Mortgages and a mortgage offered by a high street lender is that Shariah Compliant Mortgages do not work on the basis of ‘riba’ (interest). In the UK, the contracts are typically structured so the bank owns the asset as opposed to the alternative method of taking a first legal charge. You then have the option of acquiring the property over time until the loan is redeemed in full and the asset is transferred.

So, what makes a mortgage ‘Islamic’ or Shariah Compliant?

Are Islamic mortgages halal? Each lender has a Shariah Supervisory Committee comprised of Islamic financing experts and Islamic Scholars. They approve the products and often give them a Certificate of Shariah Compliance.

Islamic mortgages are not just for Muslims looking for Shariah compliant financing options, it is available to all. Most contacts by their nature, do not have any financial penalty or early repayment charges for settling the contract in full. This could be useful for those wishing to have the flexibility of selling their property in the future. In addition, the lenders offering Islamic Mortgages also cater for the UK Expat market and can potentially assist overseas nations who need property financing.

You can currently use Shariah Mortgages to:

  • Residential Property for owner occupation

  • Buy to Let in personal names

  • Buy to Let in Ltd Company Structures

  • Multi Unit Blocks

  • Commercial Property

  • Bridging Loans

 If you wish to discuss Shariah Compliant Financing, we offer a free 15 minute, no obligation consultation. Riz Malik, Director or R3 Mortgages was invited to appear on Islam Channel, which broadcasts to millions of muslims worldwide, to discuss Islamic Mortgages.

Shariah Compliant / Islamic Mortgages FAQs

  • Comparing Islamic lenders with UK high street lenders is not comparing apples with apples. UK high street lenders work on the principle of interest where Islamic mortgages do not. Also, the cost of funds is higher for Islamic banks therefore the cost of borrowing will be greater.

  • Your deposit requirements for an Islamic Mortgage will depend on whether the property is for owner occupation or buy to let. Due to the Covid pandemic, the deposit requirements may be higher that they previously were.

  • This decision is made by the Shariah Supervisory Committee. These are comprised of Islamic finance experts and scholars. Members could be on the Committee of more than one lender and it ultimately they who make that decision.

  • Yes, it is permissible to refinance to a Shariah compliant mortgage subject to lenders approval.

  • Yes, most lenders provide fixed rates options.

  • Yes, a number of Shariah compliant lenders have options for UK Expats looking to buy a property in the UK.

  • Rather than an interest rate, there is a ‘rental rate’. As the bank owns the asset, you are ‘renting’ the part that your do not own.

  • It is generally advisable to use a legal representative who is experienced in dealing with such contracts.

  • Each lender works out how much you can borrow using their own internal calculation. For a residential halal mortgage is will be based on your income and expenditure. For a buy to let halal mortgage, the rental income will also influence the borrowing capacity.

  • Unfortunately, we are not aware of any lenders who accept Right to Buy mortgage applications.