Islamic Mortgage Calculator

Calculate Shariah-compliant home financing with multiple modes

Islamic Financing Modes

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Murabaha

Cost-Plus Financing

Bank purchases property and sells it to you at cost + profit margin

Current Calculator

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Ijara

Lease-to-Own

Rent the property with option to purchase at end of lease term

Coming Soon

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Musharaka

Diminishing Partnership

Co-ownership with bank, gradually buying their share

Coming Soon

Murabaha Calculator

Property Price

Currency

Down Payment - 20% of Property Price

100,000

Financing Period (Years) - 15 years

Annual Profit Rate (%) - 4.5%

What is Murabaha?

Murabaha is a cost-plus financing arrangement where the bank purchases the property and immediately sells it to you at cost plus an agreed profit margin. The total price is fixed upfront and paid in installments.

What is Ijara?

Ijara is a lease-to-own arrangement where you rent the property from the bank with the option to purchase it at the end of the lease term. Monthly payments include rent and gradual equity building.

What is Musharaka?

Musharaka is a diminishing partnership where both you and the bank co-own the property. Over time, you gradually buy out the bank's share until you own it completely.

Key Differences from Conventional Mortgages

✓ No interest (riba) - only fixed profit margins
✓ Asset-backed financing (property must exist)
✓ Profit rate fixed at contract signing
✓ Early payment typically allowed without penalties

Typical Profit Rates by Region

📍 GCC Countries: 3-5% per year
📍 MENA Region: 4-7% per year
📍 Southeast Asia: 5-8% per year

Note: This calculator provides estimates for Murabaha financing. Actual terms vary by bank and region. Consult with Islamic finance institutions for precise quotes.

Frequently Asked Questions About Islamic Mortgage and Murabaha

🏠 What is an Islamic mortgage?

An Islamic mortgage is a Shariah-compliant home financing solution that avoids interest (riba), which is prohibited in Islam. Instead of lending money with interest, Islamic mortgages use structures like Murabaha (cost-plus financing), Ijara (lease-to-own), or Musharaka (partnership). In Murabaha, the most common method, the bank purchases the property and sells it to you at a marked-up price, which you pay in installments. The profit markup is predetermined and fixed, not variable like interest rates. This complies with Islamic principles because it's a sale transaction, not a loan. The key distinction: conventional mortgages are interest-bearing loans; Islamic mortgages are asset-backed financing arrangements.

📋 What is Murabaha financing and how does it work?

Murabaha is a cost-plus-profit sale contract used in Islamic finance. Here's how it works for home financing: (1) You find a property and agree on its price with the seller; (2) You approach an Islamic bank for Murabaha financing; (3) The bank purchases the property from the seller at the market price; (4) The bank immediately sells the property to you at cost PLUS a fixed profit margin; (5) You pay this total amount to the bank in monthly installments over the agreed period (typically 15-25 years); (6) The profit margin is disclosed upfront and remains fixed throughout the payment period. The bank's profit is earned through trade (buying low, selling higher), not through interest on a loan. At the end of payments, you own the property outright.

🔄 How is Islamic mortgage different from a conventional loan?

Key differences: (1) NATURE: Conventional is a loan with interest; Islamic is a sale or lease contract. (2) INTEREST vs PROFIT: Conventional charges interest (riba) which fluctuates; Islamic has fixed profit margin disclosed upfront. (3) OWNERSHIP: In Murabaha, the bank owns then sells to you; in conventional, you own but the bank has a lien. (4) DEFAULT: Islamic contracts prohibit penalty interest charges; conventional loans compound interest penalties. (5) EARLY PAYMENT: Islamic finance typically offers rebates for early settlement; conventional may have prepayment penalties. (6) RISK SHARING: Some Islamic contracts (Musharaka) share profit/loss; conventional is fixed interest regardless. (7) ASSET-BACKED: Islamic financing must be tied to a real asset; conventional can be abstract debt. Both result in monthly payments and property ownership, but the underlying structure and ethical basis differ fundamentally.

✅ Is Islamic mortgage really interest-free or just interest by another name?

This is a legitimate question that deserves an honest answer. Islamic mortgages are structurally and legally different from interest-based loans, though the monthly payment amounts may be similar. The key differences: (1) NATURE: Profit from trade/sale (halal) vs profit from lending money (haram). (2) RISK: Bank bears ownership risk in Murabaha; in conventional loans, borrower bears all risk. (3) FIXED vs VARIABLE: Islamic profit margin is fixed at contract start; conventional interest can be variable. (4) PENALTIES: Islamic contracts cannot charge compounding penalties for late payment; conventional can. Critics argue the end result (monthly payments) is similar, making it "interest in disguise." Supporters emphasize the theological and structural differences matter for Shariah compliance. Leading Islamic scholars including those at AAOIFI, OIC Fiqh Academy, and major fatwa councils have endorsed these structures as permissible alternatives to conventional interest. Ultimately, your acceptance depends on your understanding of Islamic finance principles.

🇦🇪 What are the requirements for Islamic mortgage in UAE?

Requirements for Islamic mortgage in UAE (2025): (1) INCOME: Minimum monthly salary typically 15,000-20,000 AED for Dubai; varies by bank and property value. (2) DOWN PAYMENT: 20-25% for UAE nationals; 25-30% for expatriates for properties under 5 million AED. (3) AGE: 21-65 years old (some banks extend to 70). (4) EMPLOYMENT: Stable employment with minimum 6-12 months in current job; 2-3 years for self-employed. (5) DEBT BURDEN RATIO: Total monthly debt repayments should not exceed 50% of monthly income. (6) DOCUMENTS: Passport, Emirates ID, salary certificate, bank statements (6 months), property documents. (7) PROPERTY: Must be completed property; under-construction financing has stricter terms. Different banks (Dubai Islamic Bank, Abu Dhabi Islamic Bank, Emirates Islamic, Mashreq Al Islami) may have varying criteria. Expatriates should note that financing is available but usually with higher down payment requirements.

🇸🇦 What are the requirements for Islamic mortgage in Saudi Arabia?

Islamic mortgage requirements in Saudi Arabia (2025): (1) INCOME: Minimum monthly income 10,000-15,000 SAR depending on the bank and property location. (2) DOWN PAYMENT: 15-20% for Saudi nationals; 30-40% for non-Saudis. (3) AGE: 21-60 years (extended to 65 for government employees). (4) EMPLOYMENT: Minimum 1 year employment for private sector; 3 months for government employees. (5) DEBT BURDEN: Total obligations should not exceed 50-55% of monthly salary. (6) DOCUMENTS: National ID/Iqama, family ID, salary certificate, bank statements (3-6 months), SIMAH credit report. (7) FUNDING PERCENTAGE: Banks typically finance up to 85% for first property, 70% for additional properties. (8) PROPERTY: Must be residential property in Saudi Arabia. Major providers include Al Rajhi Bank, Alinma Bank, Bank AlJazira, and Riyad Bank. The Saudi Real Estate Refinance Company (SRC) has made Islamic mortgages more accessible and affordable since 2018.

🏦 Which banks offer Islamic mortgage in GCC countries?

Major Islamic mortgage providers by country: UAE: Dubai Islamic Bank (DIB), Abu Dhabi Islamic Bank (ADIB), Emirates Islamic, Sharjah Islamic Bank, Mashreq Al Islami, Noor Bank. SAUDI ARABIA: Al Rajhi Bank (largest Islamic bank globally), Alinma Bank, Bank AlBilad, Bank AlJazira, Riyad Bank Islamic, SABB (has Islamic window). QATAR: Qatar Islamic Bank (QIB), Masraf Al Rayan, Qatar International Islamic Bank (QIIB). KUWAIT: Kuwait Finance House (KFH), Boubyan Bank, Kuwait International Bank (KIB), Warba Bank. BAHRAIN: Al Baraka Banking Group, Bahrain Islamic Bank, Khaleeji Commercial Bank. OMAN: Bank Nizwa, Alizz Islamic Bank, Muzn Islamic Banking. Most conventional banks in the GCC also have Islamic banking windows offering Shariah-compliant mortgages. Compare profit rates, down payment requirements, processing fees, and early settlement terms before choosing.

🌍 Can non-Muslims get Islamic mortgage?

Yes, non-Muslims can absolutely obtain Islamic mortgages, and many do. Islamic financial products are not restricted to Muslims - they are ethical finance solutions available to anyone. Reasons non-Muslims choose Islamic mortgages: (1) Fixed profit rates provide payment certainty vs variable interest rates; (2) Ethical concerns about predatory lending and debt culture; (3) Transparent pricing with no hidden fees; (4) Asset-backed financing feels more secure; (5) In some markets, Islamic mortgage rates are competitive with conventional ones. Banks offering Islamic finance welcome all customers regardless of religion. The compliance requirements are the same - income verification, down payment, creditworthiness. In the UK, US, Canada, and GCC countries, significant numbers of non-Muslim homebuyers use Islamic finance. The principles of fairness, transparency, and risk-sharing appeal broadly beyond religious considerations.

💰 What is the profit rate in Islamic mortgage and how is it calculated?

The profit rate (also called markup rate) in Islamic mortgages is the percentage added to the property's purchase price, representing the bank's profit. Calculation example: If a property costs 1,000,000 AED and the bank's annual profit rate is 4% over 20 years, the total amount you pay is approximately 1,800,000 AED (property + profit). Monthly payment would be 7,500 AED. The profit rate typically ranges: UAE: 3.5-5.5% annually; Saudi Arabia: 3-5%; Qatar/Kuwait: 3.5-5%; Bahrain/Oman: 4-6%. Factors affecting your rate: (1) Property value and location; (2) Down payment percentage (higher down payment = lower rate); (3) Financing period (longer = higher total profit); (4) Your credit profile; (5) Current market conditions; (6) Bank competition. Unlike conventional variable-rate mortgages, the profit margin in Murabaha is FIXED at contract signing, protecting you from future rate increases. Some Islamic banks offer Ijara (lease) structures where rates can be reviewed periodically.

🧮 How to calculate monthly payments for Murabaha mortgage?

To calculate Murabaha monthly payments: (1) Determine PROPERTY PRICE (e.g., 1,500,000 SAR); (2) Calculate DOWN PAYMENT, typically 20-30% (e.g., 300,000 SAR); (3) FINANCING NEEDED = Property Price - Down Payment (1,200,000 SAR); (4) PROFIT RATE = Bank's annual rate (e.g., 4%); (5) TENURE = Financing period in months (e.g., 20 years = 240 months); (6) TOTAL PROFIT = Financing × Profit Rate × Years (1,200,000 × 0.04 × 20 = 960,000 SAR); (7) TOTAL PAYABLE = Financing + Total Profit (2,160,000 SAR); (8) MONTHLY PAYMENT = Total Payable ÷ Number of Months (2,160,000 ÷ 240 = 9,000 SAR/month). Use our calculator above for precise figures. Note: Some banks use diminishing balance calculation which is more favorable to the buyer, resulting in lower total payments. Always ask the bank for a detailed repayment schedule showing principal and profit breakdown for each month.

⚠️ What happens if I cannot pay my Islamic mortgage installments?

If you face difficulty paying Islamic mortgage installments: (1) CONTACT BANK IMMEDIATELY: Don't wait until you miss payments. Islamic banks are generally more willing to restructure than conventional lenders. (2) RESTRUCTURING OPTIONS: Extension of payment period (reduces monthly payment); Temporary payment holiday; Rescheduling of installments. (3) WHAT ISLAMIC BANKS CANNOT DO: Charge compound interest penalties (prohibited in Shariah); Add penalty interest to outstanding balance. (4) WHAT THEY CAN DO: Charge administrative fees for late payment processing; Take legal action to repossess property if default continues; Report default to credit bureaus (SIMAH in Saudi, Al Etihad in UAE). (5) SALE OF PROPERTY: If you cannot continue payments, you may sell the property. You receive: Sale Price - Remaining Payable Amount to Bank. (6) FORECLOSURE: Last resort. Bank can take possession and sell property, returning any surplus after deducting owed amount. Most GCC banks have customer protection units. The Central Banks in UAE, Saudi, Qatar mandate grace periods. Approach your bank with honesty - Islamic finance principles emphasize compassion for debtors in genuine hardship.

⏰ Can I make early payment or pay off Islamic mortgage before the end of term?

Yes, early payment is generally permitted and even encouraged in Islamic finance, unlike some conventional mortgages with prepayment penalties. Early payment options: (1) PARTIAL EARLY PAYMENT: Pay extra beyond monthly installment, reducing principal faster. (2) FULL EARLY SETTLEMENT: Pay off entire remaining balance. Islamic law perspective: Many scholars say you are entitled to a REBATE (discount) on the remaining profit if you settle early, since the bank expected profit over many years. Practice varies by bank: UAE: Most Islamic banks offer hibah (rebate) of 0.5-2% on remaining profit for early settlement. Saudi Arabia: Banks typically provide discount on unearned profit. Qatar/Kuwait: Policies vary; some offer rebates, others don't. IMPORTANT: Get early settlement terms IN WRITING in your contract. Ask: "If I pay off in 10 years instead of 20, will I get a rebate on the remaining 10 years of profit?" Shariah-compliant banks should offer some concession. Early payment can save you significant amounts - a 20-year mortgage paid in 15 years might save 20-30% of total profit.

⚖️ What is the difference between Murabaha and Ijara Islamic mortgages?

Murabaha and Ijara are two different Islamic financing structures: MURABAHA (Cost-plus Sale): (1) Bank buys property and immediately sells it to you at cost + profit; (2) You own the property from day one (registered in your name); (3) Fixed total cost determined at contract start; (4) You pay monthly installments until full price paid; (5) You are responsible for maintenance, property tax, insurance; (6) Cannot be refinanced easily. IJARA (Lease-to-Own): (1) Bank buys property and leases it to you; (2) Bank owns property during lease period; (3) You pay monthly rent to the bank; (4) At end of lease, ownership transfers to you (often for nominal fee); (5) Bank typically responsible for major repairs; (6) More flexibility - can walk away at lease end; (7) Rent may be adjusted periodically (review clause). Which to choose: Murabaha is more common, simpler, gives immediate ownership. Ijara offers more flexibility but bank retains ownership. Murabaha is better for stable long-term stay. Ijara suits those who might relocate or prefer not owning during payment period. Discuss with Islamic finance advisor based on your circumstances.

💡 How do Islamic banks make profit if they don't charge interest?

Islamic banks profit through legitimate trade and risk-taking, not interest on loans: (1) MURABAHA: Bank buys asset (property, car) at market price X, sells to customer at X + markup. Profit = markup from trade. (2) IJARA: Bank buys asset and leases it to customer. Profit = rental income. (3) MUSHARAKA: Bank partners in business/property, shares actual profits from the venture. (4) MUDARABA: Bank provides capital, entrepreneur manages business, they share profits per agreement. (5) SUKUK: Islamic bonds representing ownership in assets; profit from underlying asset performance, not interest. (6) SERVICES: Transaction fees, advisory fees, account management. The key difference from conventional banking: Islamic banks must have skin in the game - they buy, own, or partner in real assets and take genuine commercial risk. They cannot make money from money itself (lending at interest). This creates different incentives: Islamic banks are motivated to ensure projects succeed (since they share risk), whereas conventional banks profit from loans regardless of borrower success. Critics argue this sometimes becomes semantic, but the structure fundamentally differs from interest-based lending.

💵 Is Islamic mortgage more expensive than conventional mortgage?

The cost comparison between Islamic and conventional mortgages varies by market and timing: GENERALLY: Islamic mortgages may have slightly higher effective rates (0.25-0.75% higher) due to: (1) Smaller market share = less competition; (2) Additional Shariah compliance costs; (3) Less developed secondary market. HOWEVER: (1) In UAE and Saudi Arabia, government support has made Islamic mortgages VERY COMPETITIVE, sometimes even cheaper than conventional. (2) Fixed profit rates in Murabaha can save money vs rising variable interest rates. (3) No penalty interest for late payment saves money if you face difficulties. (4) Early settlement rebates can reduce total cost. (5) Some banks offer Islamic mortgages at same rate as conventional to capture market share. EXAMPLE (2025 UAE): Conventional mortgage: 3.5-4.5% variable; Islamic Murabaha: 3.75-5% fixed. Over 20 years, total payment difference might be 5-10%. EXAMPLE (2025 Saudi): Both around 3.5-4.5%, sometimes Islamic is cheaper. BOTTOM LINE: Compare specific offers. The peace of mind of Shariah compliance and fixed payments often outweighs small rate differences for Muslim buyers. Non-Muslims should compare based on fixed vs variable rates, early payment terms, and total cost of ownership. Get detailed quotes from 3-4 banks before deciding.