BankHeadOffice.com         Bank Head Office Worldwide   ♦ Loan Calculators ♦ Mortgage Guides ♦ Banking FAQs ♦ Banking Institutions ♦ Central Banks Worldwide       Home  »  Mortgage Guides  »  Islamic Mortgages Islamic Mortgages The Sharia law of Islam prohibits the payment or receipt of interest, which means that Muslims cannot use conventional mortgages. However, real estate is far too expensive for most people to buy outright using cash: Islamic mortgages solve this problem by having the property change hands twice. In one variation, the bank will buy the house outright and then act as a landlord. The homebuyer, in addition to paying rent, will pay a contribution towards the purchase of the property. When the last payment is made, the property changes hands. Typically, this may lead to a higher final price for the buyers. This is because in some countries (such as the United Kingdom and India) there is a Stamp Duty which is a tax charged by the government on a change of ownership. Because ownership changes twice in an Islamic mortgage, a stamp tax may be charged twice. Many other jurisdictions have similar transaction taxes on change of ownership which may be levied. In the United Kingdom, the dual application of Stamp Duty in such transactions was removed in the Finance Act 2003 in order to facilitate Islamic mortgages. An alternative scheme involves the bank reselling the property according to an installment plan, at a price higher than the original price. Both of these methods compensate the lender as if they were charging interest, but the loans are structured in a way that in name they are not, and the lender shares the financial risks involved in the transaction with the homebuyer. Mortgage Guides Mortgage Basics Mortgage Underwriting Mortgage Repayment Islamic Mortgages Mortgage Types Mortgage Calculator Mortgage Insurance Mortgage Amortization Mortgage Refinance Fixed Rate Mortgage Adjustable Rate Mortgage Foreclosure   Mortgage Tools Download Home Loan Calculator Mortgage Amortization Schedule                 DISCLAIMER The content comes from Internet, reasonable efforts are made to maintain accuracy of information published. However, information could contain errors or inaccuracies and is presented without warranty and statutory means. No liability is assumed for errors or omissions. Viewers are advised to consult their banker or financial consultant for complete information and their professional advise. All trademarks, logos, brand names and copyrights are the property of their respective owners. © 2011 - 2022 BankHeadOffice.com ® All Rights Reserved