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Islamic / Muslim

It is against Islamic law to pay or receive interest and this has been a huge problem for Muslims living in Britain. Only the very rich could afford to buy a property outright and now many lenders are starting to recognise this problem and are offering an alternative.

There are two main options available to you that correspond to Muslim law;

  • The Murabaha (Deferred sale finance) Mortgage
  • The Ijara (lease to own) Mortgage

The Murabaha Mortgage is only really an option for individuals/families who have a fair amount of capital behind them as it is a condition of the mortgage package that you are expected to pay around 20% of your homes value, on the day of purchase. From that day, however, the house will be registered as your own and you may pay off any debt outstanding at any point. This package offers a fixed repayment period that is agreed between you and the lender and a repayment amount that is fixed for the term of your mortgage.

How does the Murabaha Mortgage work?
When you find a property 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 a deposit.

The Ijara Mortgage is a more popular choice as you do not need a large amount of capital behind you to set it up. It is also more flexible. It can also 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 penalties.

How does the Ijara Mortgage work?
As before, you find your property and agree a purchase price with the vendor, 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 the property.

 
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Nicholas Hall is an adviser with Julian Harris Mortgages Limited who are authorised and regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up payments on a mortgage or loan secured on it. Written quotations available on request. All loans are subject to status. Some loans may require assignment of life assurance. Residential Mortgage transactions will not incur a broker's commission fee. THE STERLING EQUIVALENT OF YOUR MORTGAGE UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENTS. Think carefully before securing other debts against your home.A typical APR for Adverse Credit/Credit Impaired mortgages is currently 7.2%.