Islamic and Coventional
Mortgages Compared

The differences between Islamic and Coventional Mortgages.

Islamic Mortgages

These are interest free and are called Murabaha, deferred sale agreement and Ijara, lease to own.
Sources of income and credit references for the loan can be re-examined before retirement age.
The property's value must be at least £50,000.
Provide funds up to 80% of the property's value.
Life and building insurance is not compulsory.
The bank owns the property immediately.
Payment terms for the murabaha is a minimum of 5 years and a maximum of 15 years. The Ijara has a minimum of 7.5 years and a maximum of 25 years.
Funds available for a Murabaha are up to 2.5 time the annual income. For an Ijara its up to 3 times the annual income of the sole applicant.
An arrangement fee of 0.75% is payable on the property's value after the first payment.

Conventional Mortgages

Funds are borrowed from the lender and interest is charged for the duration of the loan.
Sources of income and credit references for the loan can be re-examined before a 65th birthday
Most lenders have no lower limit on the property's value.
Lend up to 125% of the property's value.
Life and building insurance will be compulsory in most cases.
The borrower owns the property not the lender.
Payment terms can be up to 40 years.
The amount borrowed can be up to 5 times of the sole applicant.
An arrangement fee up to £500 is usually payable.

Islamic and conventional mortgages compared