Until recently, Muslims have had to compromise and use traditional western products for their savings and property purchases. But providers are now coming up with Muslim-friendly home financing solutions.   

Many Islamic mortgages, referred to as ‘home finance’, work by using the Shariah principles of Ijara with Diminishing Musharaka. Ijara is a form of leasing deal, and Diminishing Musharaka is a joint ownership between you and your lender.  

In practice it works like this: your bank buys the property you want; you then pay the price of the house in monthly installments, plus a rental payment, for around 25 years. With each payment your share of the property increases while your bank’s percentage decreases.  At the end of the leasing period, the bank transfers the title deeds of the property to your name and the property is yours.   

There are also Murabaha mortgages, where on the day of completion you immediately buy the property back at a higher price.  

It is not just the process of buying your home that must be Shariah-compliant; the money used by your lender to purchase the property should come from permissible sources only. Money linked to the tobacco, alcohol, gambling, pornography and non-Halal meat industries is prohibited.