Specialist Finance · 6 min read

Islamic Home Finance Explained

By: Keystones Mortgage Consultancy · Last Reviewed: 2026-10-21
Article Summary & Key Themes

A clear guide to Ijara, Murabaha, and Diminishing Musharaka structures certified by Sharia supervisory boards.

Islamic home finance provides property purchase solutions compliant with Sharia principles, avoiding interest (riba) through transparent lease, sale, or co-ownership contracts.

Primary Structures

  • Ijara wa Iqtina: The financier purchases the property and leases it to you for agreed rental payments that amortize the purchase price. Ownership transfers upon completion.
  • Diminishing Musharaka: A declining co-ownership partnership where you progressively purchase the bank shares in the property until you own 100%.
  • Murabaha: A cost-plus sale where the bank acquires the property and sells it to you at an agreed marked-up price paid in monthly installments.
Rate Risk Notice: Fixed rates usually last 1–5 years. After that your rate typically follows EIBOR plus the lender's margin, so payments can go up or down.

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