The Islamic law of Sharia forbids the charging and paying of interest on mortgages, something which is commonplace in standard UK mortgages. This can provide difficulties to Muslims looking to purchase property in the UK, as most mortgage lenders do not work to Sharia law.
What is Islamic Finance?
Islamic finance is a system based around finances that comply with Sharia (Islamic Law). There are two different types of Sharia finance, mudarabah ( partnership in profit in which one partner provides capital) and musharakah (an agreement between two or more partners to combine their assets, services, obligations or liabilities for the purpose of making profit).
The Islamic finance concept can also refer to the investments that are permissible under Sharia. There are specific rules that apply to Islamic finance, which differ from conventional finance. This is particularly true of mortgages, which are conventionally different to standard financial practice.
There are four fundamental aspects to Islamic finance:
Firstly, Islam considers that lending money with interest payments accrued is an exploitative practice that favours the lender. According to Sharia law, charging interest is strictly prohibited.
Any activities which contravene the fundamentals of Islam such as investing in businesses that produce and selling alcohol or pork, are prohibited. The activities are considered haram and so any financial institution that invests money into these practices is forbidden.
Thirdly, Sharia law strictly prohibits speculation or gambling with finance, which is called maisir. Islamic financial institutions cannot therefore be involved in practices which speculate on future events.
Finally, Islamic finance bans participation in any transactions with excessive risk. The term ‘gharar’ measures how risky an investment may be. Gharar defines such practices as derivative contracts and short-selling, which are forbidden in Islamic finance.
Why use a broker for a Sharia Mortgage?
The specialised nature of a Sharia Mortgage means that there are only a few specialised lenders who will offer this unique loan. In general, high street lenders will not offer this type of mortgage and so it is best to work with a specialised broker, who has an intrinsic knowledge of Sharia law and works closely with all the leading Sharia Mortgage lenders in the UK.
Articus Finance has a specialist team of experts in Sharia Mortgages, who have helped to meet the needs of those looking to secure this bespoke type of loan. Our knowledge of this area enables us to find the very best deals for our clients. We also intrinsically understand Sharia law and so can provide you with a range of mortgage options which are halal.
As with any mortgage lender, Sharia mortgage lenders will still look at your suitability to repay the loan, based on your income, assets and personal circumstances. We will use all our experience to convey these accurately to the lender and therefore to maximise your loan value.
How do I apply for a Sharia Mortgage?
As with any mortgage, you will need to work closely with us so that we can understand your income, assets and personal situation. Our experience in working with Sharia law ensures that we work with understanding and a deep sense of respect towards your beliefs.
Our location in the heart of the City of London ensures that we work closely with some of the UK’s leading Sharia mortgage providers - offering you the best deals on the market.
Our specialist mortgage brokers are highly experienced in negotiating the best mortgages and mortgage rates, no matter how complex your situation.
With over 20 years’ combined experience sourcing the best mortgage deals for global clients, our brokers have the skills, knowledge, and lender relationships to turn your property aspirations into a reality. To find out how we do it, explore our case studies.View our case studies