Ijara Mortgages

Ijara mortgages are slightly more popular than the Murabaha mortgage as the buyer is not required to make a large initial payment or deposit.

With an Ijara mortgage, you essentially rent the property from your lender. Rent payments are made to your bank each month, in addition to the agreed monthly mortgage repayments, which are fixed on a yearly basis.

Unlike the Murabaha mortgage, you only become the registered owner of the property once the agreed loan term has come to an end or the purchase price has been repaid in full (the outstanding balance can be repaid at any time without incurring a penalty).

How does an Ijara Mortgage work?

As with the Murabaha mortgage, you choose a property and agree a purchase price with the seller. The next step is to apply for an Ijara mortgage and agree repayment terms with your lender, who will then purchase and gain ownership of the property.

You then enter into a lease agreement with your lender, whereby you agree to pay back the purchase price through fixed monthly repayments (usually made over a period of 25 years), as well as an agreed amount of rent each month. This amount will reduce each year as you pay off the mortgage itself.

Once the lease period has elapsed and the purchase price has been repaid in full, ownership of the property will be transferred to you from your lender.