In a nut shell how does an Islamic mortgage work for different types of purchases?
Buying/selling: you choose property, agree price, undertake survey bank enters into contract to buy the property from vendor bank sells property to you at higher price the higher price is paid by you in equal instalments over a fixed term, irrespective of what happens to Bank of England base rate Leasing: choose property, agree price bank undertakes survey, buys property and sells it to you for the same price, in return for payments spread over fixed period up to 25 years in addition to monthly payments, you pay a sum for ‘rent’ – assessed annually in line with market trends you can overpay (as with a conventional flexible mortgage) to buy the house more rapidly Replacing a conventional mortgage with a Shariah compliant one: bank buys property from you at current market value you agree to buy back the property at the same market price the bank pays off your interest-based mortgage you repay the bank in equal monthly instalments
