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Islamic Mortgages
Islamic Mortgages, also known as Sharia-compliant mortgages or Home Purchase Plans (HPPs), are financial products designed to adhere to Islamic finance principles, which prohibit Riba: [1] (usury or interest). Instead, Islamic finance promotes financial fairness and transparency for the overall social benefit.
Overview
Islamic Mortgages, unlike conventional mortgages, operate on principles of equity participation rather than lending and borrowing. They provide a means for individuals to access home financing without involving interest payments, in accordance with Islamic beliefs.
Structures
There are three main structures commonly used in Islamic home finance [2]
Diminishing Musharaka with an Ijara [3]: This approach involves a partnership between the finance provider and the individual seeking financing. The property is co-owned, and the individual makes monthly payments that consist of rent and equity acquisition, gradually increasing their share of ownership until they own the property outright.
Murabaha: In this arrangement, the finance provider purchases the property and sells it to the individual at a higher price, which is paid back in instalments. This markup serves as the finance provider's profit, making it a transparent form of financing.
Ijara: Similar to leasing, an Ijara contract involves making monthly rental payments without acquiring equity in the property. It provides a flexible option for those not seeking immediate ownership.
Availability in the UK
While some traditional banks such as HSBC [4], Lloyds [5] have stopped offering Sharia-compliant mortgage solutions, specialised providers like StrideUp continue to offer Home Purchase Plans designed to meet the needs of the Muslim community in the UK. These providers are committed to providing transparent and Sharia-compliant financing options for homeownership.
Shariah Compliance
Islamic Mortgages must adhere to Shariah principles, ensuring that they are compliant with Islamic law. UK providers often collaborate with Shariah advisors, such as Amanah Advisors to ensure their products meet the highest standards of Islamic finance principles. Additionally, regulatory bodies like the Financial Conduct Authority (FCA) oversee and regulate Islamic finance products to ensure consumer protection.
Financial Requirements
Islamic Mortgages typically require a minimum deposit, which can vary depending on the provider and specific terms of the financing agreement. Additionally, there may be additional costs involved, such as valuation fees, solicitors/legal fees, and product fees, which are standard in the mortgage industry.
Initiating the Process
Individuals interested in obtaining an Islamic Mortgage typically begin by filling out a Decision in Principle (DIP) form, followed by consultation with experts to understand the process and requirements involved. Most UK providers offer guidance and support throughout the journey to homeownership.
Conclusion
Islamic Mortgages provide an alternative to conventional mortgages for individuals seeking Sharia-compliant financing options. By adhering to Islamic finance principles, these products promote financial fairness, transparency, and ethical conduct in the pursuit of homeownership.
References
- ^ "Interest (Riba)".
- ^ "What is an Islamic/Sharia mortgage and how do they work? | unbiased.co.uk | Unbiased".
- ^ "VATFIN8400 - Islamic products: Shared ownership (Diminishing musharaka) - HMRC internal manual - GOV.UK".
- ^ "HSBC scraps Sharia compliant mortgages". 5 October 2012.
- ^ "Big banks go cold on Islamic products". Independent.co.uk. 17 July 2010.
| Submission declined on 14 May 2024 by
HitroMilanese (
talk). This submission appears to
read more like an advertisement than an entry in an encyclopedia. Encyclopedia articles need to be written from a
neutral point of view, and should refer to a range of
independent, reliable, published sources, not just to materials produced by the creator of the subject being discussed. This is important so that the article can meet Wikipedia's
verifiability policy and the
notability of the subject can be established. If you still feel that this subject is worthy of inclusion in Wikipedia, please rewrite your submission to comply with these policies. This submission reads more like an
essay than an encyclopedia article. Submissions should summarise information in
secondary, reliable sources and not contain opinions or
original research. Please write about the topic from a
neutral point of view in an
encyclopedic manner.
Where to get help
How to improve a draft
You can also browse Wikipedia:Featured articles and Wikipedia:Good articles to find examples of Wikipedia's best writing on topics similar to your proposed article. Improving your odds of a speedy review To improve your odds of a faster review, tag your draft with relevant WikiProject tags using the button below. This will let reviewers know a new draft has been submitted in their area of interest. For instance, if you wrote about a female astronomer, you would want to add the Biography, Astronomy, and Women scientists tags. Editor resources
| |
| This article may incorporate text from a
large language model. (May 2024) |
Islamic Mortgages
Islamic Mortgages, also known as Sharia-compliant mortgages or Home Purchase Plans (HPPs), are financial products designed to adhere to Islamic finance principles, which prohibit Riba: [1] (usury or interest). Instead, Islamic finance promotes financial fairness and transparency for the overall social benefit.
Overview
Islamic Mortgages, unlike conventional mortgages, operate on principles of equity participation rather than lending and borrowing. They provide a means for individuals to access home financing without involving interest payments, in accordance with Islamic beliefs.
Structures
There are three main structures commonly used in Islamic home finance [2]
Diminishing Musharaka with an Ijara [3]: This approach involves a partnership between the finance provider and the individual seeking financing. The property is co-owned, and the individual makes monthly payments that consist of rent and equity acquisition, gradually increasing their share of ownership until they own the property outright.
Murabaha: In this arrangement, the finance provider purchases the property and sells it to the individual at a higher price, which is paid back in instalments. This markup serves as the finance provider's profit, making it a transparent form of financing.
Ijara: Similar to leasing, an Ijara contract involves making monthly rental payments without acquiring equity in the property. It provides a flexible option for those not seeking immediate ownership.
Availability in the UK
While some traditional banks such as HSBC [4], Lloyds [5] have stopped offering Sharia-compliant mortgage solutions, specialised providers like StrideUp continue to offer Home Purchase Plans designed to meet the needs of the Muslim community in the UK. These providers are committed to providing transparent and Sharia-compliant financing options for homeownership.
Shariah Compliance
Islamic Mortgages must adhere to Shariah principles, ensuring that they are compliant with Islamic law. UK providers often collaborate with Shariah advisors, such as Amanah Advisors to ensure their products meet the highest standards of Islamic finance principles. Additionally, regulatory bodies like the Financial Conduct Authority (FCA) oversee and regulate Islamic finance products to ensure consumer protection.
Financial Requirements
Islamic Mortgages typically require a minimum deposit, which can vary depending on the provider and specific terms of the financing agreement. Additionally, there may be additional costs involved, such as valuation fees, solicitors/legal fees, and product fees, which are standard in the mortgage industry.
Initiating the Process
Individuals interested in obtaining an Islamic Mortgage typically begin by filling out a Decision in Principle (DIP) form, followed by consultation with experts to understand the process and requirements involved. Most UK providers offer guidance and support throughout the journey to homeownership.
Conclusion
Islamic Mortgages provide an alternative to conventional mortgages for individuals seeking Sharia-compliant financing options. By adhering to Islamic finance principles, these products promote financial fairness, transparency, and ethical conduct in the pursuit of homeownership.
References
- ^ "Interest (Riba)".
- ^ "What is an Islamic/Sharia mortgage and how do they work? | unbiased.co.uk | Unbiased".
- ^ "VATFIN8400 - Islamic products: Shared ownership (Diminishing musharaka) - HMRC internal manual - GOV.UK".
- ^ "HSBC scraps Sharia compliant mortgages". 5 October 2012.
- ^ "Big banks go cold on Islamic products". Independent.co.uk. 17 July 2010.