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Instead of borrowing money and paying interest, you work with the lender to buy the property together. These mortgages are ethical, interest-free and open to everyone – not just Muslims.
In this guide, you’ll learn:
A Sharia-compliant mortgage, also known as an Islamic mortgage, is a way to buy a home that follows Islamic law. It’s often called halal financing.
In Islam, paying or receiving interest (called riba) is not allowed. Interest is seen as unfair or exploitative, so Islamic mortgages avoid it completely.
Instead of lending money and charging interest, Islamic banks use special methods to help you buy a home. These are called Home Purchase Plans (HPPs), and they’re designed to keep the process ethical and in line with Sharia principles.
The key difference is interest:
Instead of a loan, the lender buys the property (or part of it) for you. You then pay rent and gradually buy their share. Over time, you become the full owner.
There are a few kinds of Islamic mortgages, and each one works in a slightly different way. Let’s walk through them so you can see how they compare.
Ijara is a lease-to-own plan. The lender buys the property, and you pay rent to live in it. Part of your payments goes toward buying the home.
Over time, you pay off the full cost. Once the plan ends, you own the property outright.
With Diminishing Musharaka, you and the lender buy the property together. You pay rent to live there and buy the lender’s share over time.
Each payment reduces their share and increases yours. As you own more of the property, your rent goes down. Eventually, you own the home completely.
Murabaha works a bit differently. The lender buys the property, then sells it to you at a higher price. You pay this total amount back, including the lender’s profit margin, in fixed payments over time.
You’ll usually need to pay a deposit, often 20% or more, before the plan starts.
Getting an Islamic mortgage is like applying for any other mortgage. The main difference is making sure the mortgage is Sharia-compliant.
Here’s how to apply:
1. Research lenders. Not all banks offer Islamic mortgages. Look for one that provides Sharia-compliant options.
2. Check your finances. Review your income and savings. You’ll usually need a deposit of at least 20%.
3. Speak to an expert. A specialist advisor or broker can help you understand your options and guide you through the process.
4. Prepare your documents. You’ll need proof of ID, income and bank statements to show you can afford the mortgage.
5. Find a property. Work with your advisor to choose a home that fits your budget and needs.
6. Apply. Once you’ve found a property, complete the application and send in your documents.
Like with any mortgage, there are advantages and disadvantages to Sharia-compliant mortgages.
No, anyone can get an Islamic mortgage. You don’t have to be Muslim. Some people choose them because they follow ethical rules and don’t charge interest. This can appeal to non-Muslims too.
You can get a buy-to-let Islamic mortgage in the UK. But options are limited, so you may need to go through a specialist bank or building society.
Murabaha plans are often used for buy-to-let properties in the UK.
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. Plus, fewer lenders offer Islamic mortgages, so there’s less competition. This can push prices up.
You can change from a regular mortgage to an Islamic mortgage in the UK. This is called remortgaging. It means you replace your current mortgage with one that follows Sharia law.
To do this, an Islamic bank or lender usually buys the property from you or your current lender. You then agree to a Home Purchase Plan (HPP), which is designed to follow Islamic finance rules.
This information is for guidance only. To find out what options are most suitable for your circumstances, speak to a mortgage broker.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up with payments on your mortgage. Saga Money may receive payment from Tembo if you get a mortgage offer via the Saga Mortgages service. This will not affect the amount you pay for the service.
Saga is a registered trading name of Saga Personal Finance Limited, which is registered in England and Wales (company number 3023493). Registered office 3 Pancras Square, London, N1C 4AG. Saga Personal Finance Limited is authorised and regulated by the Financial Conduct Authority under the registration number 178922.
Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652. Tembo Money was awarded Best Mortgage Broker at the British bank awards in 2022, 2023, 2024 and 2025.
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