Islamic Conveyancing and Financial Services
Conveyancing in line with your faith
Sharia compliant mortgages
Our team are aware that there are three types of Islamic sharia compliant mortgages available set out to abide by sharia law. These three options are all set out as a banking model in which no interest is charged, however where the bank or other lending institution still makes a profit.
Generally the bank will either earn their money as profit or as rent paid for living in the property until the mortgage is paid off.
Whereas with standard mortgages the lender would transfer the money to the buyer of the property, with Islamic mortgages the bank will buy the property and the buyer will pay the bank back over an agreed period of time in instalments.
Exactly how the money is paid back to the lender depends on the type of mortgage; Musharakah, Murabaha or Ijara.
Sharia compliant home purchase plans
Because the banking model for Islamic mortgages is different to the standard interest-rate based model, most banks won’t use the word ‘mortgage’.
For example, Al Rayan, formerly known as ‘The Islamic Bank of Britain’, calls their services for muslims buying property ‘Sharia-compliant home purchase plans’.
In their case, you would pay both an acquisition payment and a rental payment to the lender.
The acquisition payments slowly increases the share you hold on the property, while the rental payment provides your lender with rent paid for the portion of the property that the bank still owns.
Islamic financial services
Within Islam the use of certain financial products is prohibited. Holding money in interest rate paying savings accounts and setting up standard mortgage agreements in which fees are charged through interest rates are both banned.
This is because interest rate services will inevitably increase the wealth of the investor at the cost of the borrower, which in Islamic beliefs is seen as prohibited, or ‘Riba’.
Within the UK mortgage sector there is generally less competition in the market of sharia compliant mortgages compared to standard mortgages.
As a result sharia compliant mortgages are often less competitively priced. However, as they are not classed as actual mortgages the administration fees are often lower.
With an Islamic mortgage the property is initially purchased by the bank before it is transferred to the actual buyer. As a result it is likely that stamp duty will need to be paid twice.
We can help you
Our specialist Islamic conveyancing solicitors will help guide you through the conveyancing process with ease, ensuring that all aspects are handled in a sharia compliant manner.
We know how important it is to observe your faith when dealing with property matters, and can ensure that that happens. We can help the process run as smoothly as possible, so why not give us a call today.