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Islam embraces all aspects of a Muslim's life including finance. Sharia law forbids the payment or receipt of interest but permits the sharing of risk and profit.
Most home mortgages by UK lenders involve the payment of interest but at least one lender provides assistance with home purchase and 'buy to let' funding, and these arrangements could be appropriate and available to non Muslims.
Ijara is an arrangement where the chosen property is purchased by the bank and sold to the client for the same sum, with payment spread over an agreed term of up to 25 years. During the period of purchase, the property is occupied under lease and the client pays rent to the bank.
Murabaha is an arrangement whereby the property is purchased by the bank at the agreed price and then immediately resold to the client at a higher price, determined by the number of years over which payment is to be made.
A first purchase instalment of 20% of the property value is required, and there are often higher Stamp Duty costs than with an interest bearing mortgage. Properties purchased under local authority 'right-to-buy' schemes cannot qualify.
This is not a recommendation for any particular product, but more details are available from the United Bank of Kuwait plc and www.islamic-banking.com.
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 10 May 2002.