Muslims obtain mortgages through Sharia-compliant, interest-free financing (Halal mortgages) that avoid riba (usury) by using structures like Co-ownership (Musharaka), Ijara (leasing), or Murabaha (cost-plus financing). Specialized Islamic lenders purchase the property and either rent it to the buyer or sell it at a profit, with payments going toward equity rather than interest. These often require larger down payments, typically 20% or more.
Generally, Islamic finance buys a house based on the preference of a home buyer and sells the house to the home buyer with a profit. It is different from a traditional loan, where the bank only gives money to the buyer and asks for a return of funds with interest.
The average process takes between 6-9 weeks. It can be quicker or slower, depending on the parties in the chain. For example, if you are a first-time buyer, purchasing a new build property with a mortgage in principle, it could take 8 weeks or longer. How long will your house sale take with an Islamic mortgage?
Halal mortgage (Ijara - lease-to-own): The lender buys the house and leases it to you. Your monthly payments include rent and a portion toward purchasing the property. Over time, you gradually own more of the house until it's fully yours. No interest is involved, and the lender shares some of the risks.
Whilst conventional mortgages involve the bank having a legal charge over the property with capital and/or interest payments, Islamic mortgages involve buying a home in partnership with the bank or building society with no interest payments involved.
Islamic mortgages are mortgages that are compliant with Sharia law. Also known as 'halal mortgages', they differ from traditional home loans in that you don't pay interest as this is forbidden under Sharia law. Making money from money goes against Islamic finance beliefs.
Deposit. You'll typically need a deposit of at least 20% of the property to qualify for a Sharia-compliant home purchase plan.
Any loan given by Islamic banks must be interest-free. This is because in Islam, usury (charging interest) is seen as fundamentally unjust and unfair.
Islamic mortgages can cost more than regular ones. They often come with higher admin and legal fees because the process is more complex. You might also need a bigger deposit – usually 20% or more. That means a higher upfront cost.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
Risky spending habits
But frequent and large transactions to betting shops or gambling sites can be a major red flag. It suggests risky spending habits, which may raise concerns on whether you'll prioritise mortgage repayments.
There are 6 simple steps to apply for a mortgage: pre-application, initial application, assessment and affordability checks, valuation, offer, completion.
A set of Islamic principles—based on the goal of providing economic justice for all—prohibits Muslims from paying or receiving interest during financial transactions. Some Jewish and Christian groups face a similar prohibition.
Major urban centers, especially in New York City, Los Angeles, Chicago, Houston, Dallas, Detroit, and Washington, D.C.
Riba-free financing: Look for financing structures that don't involve interest-bearing loans. This could mean paying for properties with all-cash or using Islamic finance structures approved by Islamic scholars.
Islamic lenders follow the same guidelines as all mortgage lenders when it comes to credit checks, as they need to be confident those borrowing can afford the loan repayments. It's very unlikely that you would get an Islamic mortgage, or any other type of mortgage deal, without a credit check of some type.
A halal mortgage or Islamic Mortgage is any type of Shariah-compliant financing used to purchase a home. It is characterized and distinguished from a conventional mortgage primarily by the absence of interest / riba.
Qualification requirements for a halal mortgage in Canada
They will likely review your income, credit history, and may require a down payment of at least 20%. Halal Financial Corporation, however, requires a minimum down payment of 25%.
A shariah-compliant current account does not pay interest. The bank gives you access to your money and uses your deposit as an interest-free loan, known as a 'qard', to help finance its operations. If you open a savings account, your bank will invest the money you deposit – but not in anything shariah says is harmful.
Islamic finance providers require at least 5% of the property price to be held as genuine savings. For example, if you're buying a property for $800,000, you'll need to show $40,000 in genuine savings.
Islamic or Sharia compliant finance is a form of business funding which adheres to the practices of Islamic law. Some of these practices include: Not charging interest on financial products. Not benefiting from Haram practices such as gambling or alcohol.
Islamic mortgages often appear more expensive at first glance. Here's why: Profit Rates: Typically, these are comparable to or sometimes higher than conventional interest rates. As of 2024, HPP profit rates range from 4.5% to 6%.
But ethically and equitably, Islamic home financing is superior. Islamic home financing works differently than traditional loans because Islamic financial institutions are not permitted to charge interest, in order to protect people from exploitation and to help build financially healthy societies.
Rather than charging or paying interest (riba), an Islamic mortgage is structured so that the bank purchases the property or buys the property jointly with the customer. You then pay rent or buy back the bank's share over time until you fully own the home.