What Makes Islamic Home Loans Different from Conventional Ones?


There are a few key ways in which Islamic home loans differ from conventional home loans in Houston, Texas. The most important difference between an Islamic mortgage and a conventional mortgage loan is that the former follows Shariah Law, which does not allow the lending of money with interest. Below is a quick rundown of what makes Islamic home loans unique.

Islamic home loans are Sharia-compliant.

Under Shariah Law, Islamic home finance companies are prohibited from charging interest. Instead of interest, Houston Islamic home loans often follow the Murabaha model, in which the lender and borrower agree on a purchase price for the property, and the borrower then pays the lender back over time in installments.

Islamic home loans have higher down payment requirements.

Since Islamic law prohibits the lending of money with interest, Islamic home loans typically do not allow for the deferral of payments. Islamic mortgage lenders tend to require a larger down payment to make up for these. Applicants of Shariah-compliant home loans must pay at least 5% of the property’s purchase price as a down payment.

Islamic mortgages are interest-free.

Islamic mortgages do not carry interest. This is in keeping with Islamic law, which prohibits the charging of interest. Instead of paying interest or riba, Islamic home buyers often make monthly payments that go toward both the principal and a profit rate for the Islamic home finance service providers.

Lower charges on late payments.

Houston Islamic home loans often have lower charges for late payments than conventional loans. This is because Islamic law prohibits the charging of interest, so Islamic lenders are not allowed to profit from late payments. Late payment charges are used to cover clerical work to manage a homebuyer’s account. Furthermore, the majority of late payment charges are donated to charitable organizations.

The Co-Ownership model is permitted.

Islamic home loans in Houston often use a co-ownership model, in which the bank and the borrower each own a portion of the property. This allows Islamic lenders to avoid the charging of interest, as Islamic law prohibits the lending of money with interest. A co-owner is different from a borrower. Based on the principle of joint ownership, the Islamic home lender and home buyer have an equitable stake in the property, and each has a right over it. Islamic home loans often use a Musharika contract, which is a profit-sharing agreement between the Islamic finance company and the borrower.

Islamic home loans can be a great option for those who are looking for an alternative to traditional home financing products. If you are interested in learning more about Houston Islamic home loans, you can always depend on Devon Islamic Finance to provide you with the latest information and resources. We provide a comprehensive range of Halal mortgage products that are compliant with Islamic law, and our team of Islamic home loan experts in Houston is always available to answer any questions you may have. Contact Devon Islamic Finance today to learn more about our Islamic home loan products and how we can help you finance your dream home.

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