For Muslims seeking to buy a home without compromising their faith, Islamic home purchase plans offer halal alternatives to conventional mortgages. These plans avoid riba (interest) while still making homeownership achievable.
Why Islamic Finance?
Traditional mortgages involve paying interest, which is prohibited in Islam. Islamic finance operates on different principles: no interest (riba), profit and loss sharing, asset-backed transactions, ethical investments only, and complete transparency in all terms.
Three Main Types of Islamic Home Purchase Plans
1. Ijara (Lease-to-Own)
The bank purchases the property and leases it to you. You make monthly payments covering rent and contributions toward ownership. At the end of the term, the property becomes yours.
Best for: Those wanting a straightforward option with fixed payments.
Key point: The bank owns the property until you complete all payments.
2. Diminishing Musharaka (Declining Partnership)
You and the bank jointly purchase the property as partners. You gradually buy out the bank’s share while paying rent on their portion. As your ownership increases, rent decreases.
Best for: Those who want to be part-owners from day one and benefit from property appreciation immediately.
Key point: Your ownership percentage grows with each payment.
3. Murabaha (Cost-Plus Sale)
The bank buys the property and immediately sells it to you at a higher price (cost plus profit). You pay this fixed total in installments.
Best for: Those who value complete price transparency and want immediate ownership.
Key point: The total amount you’ll pay is fixed and known from the start.
What to Expect
Costs: Islamic plans typically cost 0.5-2% more than conventional mortgages, though the gap is narrowing. Expect to put down a 20-25% deposit, though some providers accept 10-15%.
Providers: Specialist lenders and some conventional banks with Islamic divisions offer these products.
Timeline: The application process is similar to conventional mortgages but includes a Sharia compliance review by the provider’s Islamic scholars.
Key Advantages
You can buy a home without compromising Islamic beliefs. Ethical and transparent transactions with no hidden fees. Asset-backed financing provides stability. Some plans offer partnership benefits and shared risk.
Important Considerations
Slightly higher costs than conventional mortgages. Fewer providers mean less competition. Some plans have early repayment restrictions. Ensure your chosen plan is certified Sharia-compliant by qualified scholars.
Making Your Choice
When selecting an Islamic home purchase plan, compare multiple providers and their profit rates, understand the specific structure and your obligations, verify Sharia compliance certification, calculate total costs including all fees, and consider getting advice from Islamic finance specialists.
How We Can Help You
As specialist property brokers with expertise in Islamic finance, Empreso understands that navigating Sharia-compliant home purchase plans can be overwhelming. Here’s how we support you:
Expert Guidance: At Empreso, we explain each Islamic finance structure in simple terms and help you understand which option best suits your circumstances and financial goals.
Provider Access: Empreso works with multiple Islamic finance providers, giving you access to the best rates and terms available in the market. Our relationships with lenders can streamline your application process.
Comparison Service: Empreso compares different Islamic home purchase plans side-by-side, breaking down the total costs, monthly payments, and long-term implications so you can make an informed decision.
Application Support: Empreso assists with gathering documentation, completing applications accurately, and liaising with providers on your behalf to keep the process moving smoothly.
Sharia Compliance Verification: Empreso only works with providers whose products are certified by qualified Islamic scholars, giving you peace of mind that your financing is truly halal.
Ongoing Advice: From initial free consultation through to completion and beyond, Empreso is here to answer your questions and provide support at every stage of your homeownership journey.
Whether you’re a first-time buyer exploring Islamic finance options or an experienced homeowner looking to refinance in a Sharia-compliant way, we’re here to make the process straightforward and stress-free.
The Bottom Line
Islamic home purchase plans provide a halal path to homeownership. While they may cost slightly more than conventional mortgages, they allow Muslims to achieve their property goals without compromising their faith. As the Islamic finance industry grows, these products are becoming increasingly competitive and accessible.
Whether you choose Ijara, Diminishing Musharaka, or Murabaha, you can own your home while staying true to Islamic principles. And with the right broker by your side, the journey becomes much simpler.
Author: Herman Sime
Hi there! I’m Herman Sime, and I believe every person has a unique story to tell. My journey has been shaped by curiosity, honesty, and a strong desire to grow. I've had the pleasure of working in customer service, private security, and property, where I've learned to blend ambition with a heart for helping others. Throughout my career, I’ve tackled some interesting challenges that have taught me a lot about teamwork, problem-solving, and leadership. I see tough times as chances to learn and expand my perspective. When I’m not working, I’m all about integrity, open communication, and lifelong learning. I love staying active with sports like badminton, squash, and football. I’m also proud to be an NHS Volunteer Responder and the founder of SOS SOLDEV, a charity that has been providing scholarships to vulnerable children in Cameroon since 2012. Plus, I help out as a moderator for my local Freecycle Group, where we share and reuse items in our community. At the end of the day, I aim to make a positive impact on everyone I meet and in the community around me. Looking forward to sharing stories and making connections!