Islamic Financial Solutions : Islamic Mortgages / Halal Mortgages

Islamic home purchase plan

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Islamic home purchase plan

Market competitive - available to all customers regardless of faith
No penalty for lump sum payments and no early repayment charges
Income from up to four people can be taken into account

How does a Sharia�a compliant plan differ to a conventional mortgage?

The table below outlines the key differences between the two:

Islamic Methods	Conventional Methods
The customer is renting the property from the Bank and will pay rent on the occupied share of the property	The customer is paying interest on money borrowed as a loan received from the bank
Both the bank and the customer are responsible for maintaining the property	The customer is fully responsible for maintaining the property
The bank charges an income in the form of rent for using its share of the property	The bank charges an income in the for of interest on the loan borrowed by the customer
The partnership between the customer and the bank puts equal risk for both parties associated with ownership of the property	The bank carries no ownership risks
The bank will legally own the property but the customer will have the beneficial interest of the property and the leasehold	The customer is the legal owner of the property

Payments are split into two components:

Rent � This is the amount paid to the bank for it's share of the property. This is covered the ljara (lease) agreement.

Acquisition � This is the amount paid towards buying out the banks share in the property. This is covered by the Diminishing Musharaka (partnership) agreement.

As the banks share is reduced through payments, the rent reduces to reflect this.

The rent costs are fixed for the initial period of the Lease Agreement until either the end of March, or the end of September, whichever comes first after the date of completion. After this, the rent costs will be fixed for six month blocks and will be reviewed in March and September each year. At each Rent Review date the rent rate may increase, decrease or stay the same.