A Sharia mortgage, anyone?

[brian]

Well the idea of an interest-free mortgage can only be appealing!

http://news.bbc.co.uk/1/hi/business/5075998.stm

Under Sharia Islamic law, making money from money, such as charging interest, is usury and therefore not permitted.

Wealth should be generated only through legitimate trade and investment in assets.

Investment in companies involved with alcohol, gambling, tobacco and pornography is strictly off-limits.

and then:

Both Lloyd TSB's current account and mortgage products are open to non-Muslims.

And according to Mufti Barkatullah, one of a four-strong panel of Islamic scholars advising Lloyds TSB, the concept of Sharia appeals to the wider community.

"Sharia is about an ethical way of life and appeals to many people," Mr Barkatullah said.

"I have been told that as many as 20% of people enquiring about Islamic products in one area are non-Muslim."

If interest-free mortgages are available to non-Muslims, then what's the catch?

[MarkD]

Hi Brian,

I think they end up paying the same as anyone else but they structure it differently. I haven't any experience in this area but my guess is the lend er sells the property to the buyer at a price with all the interest rolled up.
Various lenders offer the facility so if you are really interested you can probably look up the actual mortgage finance detail pretty easily.

[brian]

Hm, that's a good point - so it's simply the case of increasing the house price first, so the overall effect is essentially the same?

Ah, well - I guess there's no such thing as a free lunch.

[OneofaKind]

I suspect that there are conditions for them, that mean they are not open for everyone.

[brianabbott]

Hi Chaps,

There are two types of Islamic mortgages:

Murabah: The bank buys the property from the vendor at the current selling price. The bank then sells it to the client for a higher price. Repayments are made over a 15 year period. The bank makes its money from the differential.

Ijara: The bank buys the property from the vendor and owns the property. The property is sold to the client over a period of up to 25 years, the property is not transferred to the client until after the agreed repayment period and the full purchase price has been made. During this period the bank charges the client a rent to live in the property. The bank makes its money from the rent.

Regards,

Brian Abbott
Independent Mortgage Broker
0844 870 0573

Brian Abbott trading as Mortgage Finance UK is an Appointed Representative of the Mortgage Times Group Limited which is authorised and regulated by the Financial Services Authority number 303007
Your home may be repossessed if you do not keep up payments on your mortgage

[tater03]

Well put that way it sounds like your basic house payment for any morgtage or am I missing something?

[sppl]

no you are missing nothing ...basically its a load of garbage its just a way of appeasing peoples religious beliefs ...it keeps them happy and the the lender makes its money .