As-Salamu Alaykum to our Muslim followers! Our second segment of Stablelaw Says is all about Sharia home purchase plans.
Buying a home is usually the biggest investment we’ll make in our lifetimes. Most of us aren’t lucky enough to buy one outright, so funding is usually required from a bank or building society to help us step onto the property ladder. It can be stressful finding the right mortgage, but Muslim homeowners often have even less choice. Many would like to choose an Islamic mortgage, which aligns with Islam’s Sharia law and the teachings of the Quran. These mortgages include the payment of interest (Riba) to the bank so that it can profit.
Some banks offer Sharia compliant home purchase plans to make buying property easier for Muslim customers. There are three common types:
- Ijara – a form of lease of the property from the Bank to the purchaser
- Diminishing Musharaka – a form of joint ownership with payments being made by the purchaser to the Bank to buy the property from the Bank over a course of time
- Mudaraba – an agreement between the Bank and the purchaser (although more uncommon as these are usually used in business relationships)
The bank’s profits in home purchase plans are based on ‘Bank Base Rate’. This is usually in the form of a percentage, so you can compare the rates of profit to the interest rates of banks who offer Islamic mortgages.
It’s also important to note that the bank will require separate solicitors to act on its behalf where a home purchase plan is being taken out, so that the documents can be approved. Your bank will be able to guide you on this process.
If you require further information on Sharia home purchase plans, please don’t hesitate to contact us. We will happily put you in touch with a specialist solicitor partner of StableLaw so you can realise your dream of homeownership without compromising your faith.
