What is Islamic Finance?

Islamic Finance is the name given to a group of products offered by Banks in the UK to allow Muslims (and Non-Muslims) to purchase property using an instrument which is Shariah compliant.

How does it work?

You will identify a property which you wish to purchase. The Bank will purchase the property of your choice and becomes the legal owner. You will become the beneficial owner.

The bank will grant you a lease and you will make payments on a monthly basis. The payment consists of capital, which increases your share in the property, and rent for the occupied share of the property. One of the crucial elements of the product is that you do not pay interest, which is prohibited under Shariah Law.

Rent reviews usually take place every 3 months, 6 months or yearly depending on the instrument and the Bank, until you have bought the Bank's share completely. The legal title will then be transferred to you.

In contrast to conventional mortgages the Sharia compliant finance products offer partnership with the Bank which means that you and the Bank will share the risk in respect of ownership of the property.

The finance products offered by the Banks are usually based on one of these instruments: 

  • Diminishing Musharaka – This is the most popular form of Islamic finance The Bank will buy the property and grant you a lease. In addition a Trust is created between you and the Bank. With each payment your share in the property will increase until you have bought all the shares in the property. The Bank will then transfer the legal title into your name.
  • Murabaha – The Bank will buy the property and will sell it back to you on a deferred basis.
  • Ijara - The Bank will buy the property and grant you a lease for a term. Once the lease period is completed the Bank transfers the legal title of your new home to you.

Who offers Islamic Finance products?

There are a number of Banks in the UK that offer Islamic Finance Products. If you would like further information on the providers of Islamic finance please contact Anton Osborne, whose contact details are set out below.

The majority of Solicitors and Licensed Conveyancers do not have detailed knowledge of this relatively new method of purchasing property. McMillan Williams has specialist expertise in dealing with the conveyancing process involving Islamic home finance products. This expertise enables the smooth progress of any transactions involving Islamic home finance and will avoid any unnecessary delay and the resultant stress this may cause.

AT MCMILLAN WILLIAMS WE CAN PROVIDE THE CONVEYANCING SERVICE TOGETHER WITH ADVICE ON THE ISLAMIC FINANCE ELEMENT.

For further information or a quote please contact:

Anton Osborne on 020 8432 2041 - email anton.osborne@mwsolicitors.co.uk.

We also provide an Islamic Will service. For further information please click here.