Islamic Mortgage

NoBigDebt

I have ust come across something called an Islamic mortgage. Apparently anyone can apply for one whether they are an Islamist or not. They are supplied by all the islamic banks and now I think Lloyds are offering them also. It seems like a great idea and so was wondering if anyone has one of these or has any feedback on the principle. Best Regards to all.

Gloomendoom

Well, come on then. Spill the beans.

How do they work? Why do they sound like a great idea?

flashnazia

They are expensive.

What's an Islamist?

RobertoMoir

NoBigDebt wrote: »

I have ust come across something called an Islamic mortgage. Apparently anyone can apply for one whether they are an Islamist or not. They are supplied by all the islamic banks and now I think Lloyds are offering them also. It seems like a great idea and so was wondering if anyone has one of these or has any feedback on the principle. Best Regards to all.

It is a great idea if you're a Muslim and find the idea of paying interest to be incompatible with your faith.

The benefits are less clear if you're not a Muslim however, and aren't bound by their rules; it certainly isn't a case of "no interest = woohoo cheap mortgage!"

maninthestreet

These mortgages have been available for a number of years. They try to get around the restriction in Islam of either paying, or receiving interest on a loan or investment, respectively.

thegirlintheattic

The bank basically buys the house for you then sells it back to you at a higher price which means they make money without interest.

Your monthly payments are then fixed and do not change with the interest rates, so if the IR goes up you can benefit but if the IR goes down you don't benefit.

holly_hobby

This was discussed last yr - have a read of the attached thread for info.

Sharia mortgages are not restricted to Muslims, but their primary role is to service sharia law which very basically prohibts the paying of or benefit of interest.

I also discussed various providers who operate in the market.

https://forums.moneysavingexpert.com/discussion/3613117

Hope this helps

Holly

jason1231972

NoBigDebt wrote: »

I have ust come across something called an Islamic mortgage. Apparently anyone can apply for one whether they are an Islamist or not. They are supplied by all the islamic banks and now I think Lloyds are offering them also. It seems like a great idea and so was wondering if anyone has one of these or has any feedback on the principle. Best Regards to all.

An Islamist and a Muslim are quite different things!

There are a few different varieties of Islamic 'mortgages'. They are, on paper, 'interest free', in order to comply with Sharia law requirements. What they are not, though, is necessarily cheaper than 'other' mortgages.

One method involves a (necessarily wealthy) investor (seen or unseen) buying a property outright, then selling it back to another person in small increments. Monthly payments work like 'rent', and can fluctuate as far as the market dictates. Each 'rental' payment buys a portion of the property, until it's eventually owned outright by the purchaser in question. There's no 'interest' on paper, so it's Islamically sound, but it doesn't actually translate into a cheaper option of purchasing a home in most cases in the UK.

Of the major banks, HSBC offers a Sharia-compliant mortgage. Others probably do, but this one springs to mind.

holly_hobby

The link I added discussed in depth the 3 different variations of Sharia repayment vehicles the mechanics of each, Sharia law re benefit of interest, and also a list of providers offering compliant mortgages within the UK (of which HSBC as you note, market such via HSBC Amanah)

The OP hasn't returned to the thread, so I assume they have elected not to pursue the matter.

Hope this helps

Holly

Ali_Baba

Islamic Finance isn't doing great at the moment. Here's a detailed discussion about how and why Islamic Banks in the UK have been failing so badly by an expert insider:

http: //shar.es/tUfed

It's a long article. Short version is: Islamic Banks seem to have forgotten that Muslim customers are ordinary human beings who want to know their money is safe and that their bank will give them good service and instead tried to rely on emotional blackmail which has made most of their potential customers run a mile.