Under Shariah Islamic law, it is forbidden to make money from money, such as that of charging interest. Wealth is only to be accumulated through legitimate trade and investments in assets.
Basically with Islamic finance, any form of interest is disallowed. When it comes to borrowing money, Islamic mortgages work on the basis of risk sharing. The risk of an investment is shared between the customer and the bank on pre-agreed terms, and they share any of the profits.
There are five main categories to Islamic finance, and these are as follows:
Ijara: Ijara is an agreement whereby the bank buys an item that the customer needs, then leases to the customer over a specified period of time.
Ijara wa Iqtina: This works on the same basis as Ijara, only the customer is able to actually buy the item from the bank, once the contract had ended.
Mudaraba: This is for specialist investments with a financial expert, on the basis that the bank and the customer share any of the profits that are generated. Customers do risk losing their money in the event that the investment is unsuccessful, but the bank won’t charge any handling fees unless the investment is profitable.
Murabaha: This is a form of credit, which allows the customer to purchase an item without having the need to take out an interest bearing loan. Instead, the bank will buy the item, and then sell it to the customer on a deferred basis.
Musharaka: This is an investment partnership, whereby the terms of how the profit will be shared is pre-agreed in advance, and any losses are only pegged to the amount of money invested.
If you are interested in this type of mortgage, we are sure that you are aware how difficult is to find the advice that you require. We pride ourselves in the fact that Leap Frog Finance is able to meet your Islamic mortgage needs in a way that will leave you safe in the knowledge that you are being offered the best possible deal, and more than that, you will be offered an Islamic mortgage that will meet your needs in every possible way.
If you would like further details please do not hesitate to contact us on 0800 612 7729 or fill in a few details on enquiry form and have one of the Leapfrog Finance Advisors call you back, alternatively, email us at Enquiry@leapfrogfinance.co.uk