Mortgage basics
Is an Islamic mortgage more expensive than a conventional one?
Not generally. Islamic mortgages use a profit rate instead of interest, but pricing is typically broadly comparable to conventional mortgage rates from the same banks. The best way to know for sure is to compare indicative offers across both structures for your specific profile.
How profit rates compare to interest rates
Islamic banks price their Ijara and Murabaha products competitively against conventional mortgages, since they're competing for the same borrowers. The profit rate you're quoted reflects similar factors — your income, deposit, the property and prevailing market pricing — rather than a separate, higher-cost category.
What can create small differences
- Fewer banks offer Islamic products, which can slightly limit competitive pressure
- Product structures (Ijara vs Murabaha) can carry different fee treatments
- Late payment charges are treated as charity contributions rather than interest, which changes the penalty structure
- Early settlement is capped the same way as conventional loans: 1% of balance or AED 10,000, whichever is lower
A worked cost comparison
| Structure | Indicative pricing basis | Fees |
|---|---|---|
| Conventional mortgage | Interest rate, e.g. from 3.89% for residents | Arrangement 0-1%, valuation, registration |
| Ijara / Murabaha | Profit rate, broadly comparable | Arrangement 0-1%, valuation, registration |
Because the fee structure is usually near-identical, the profit rate versus interest rate is the main variable to compare — and both move with the same underlying market conditions.
How to compare properly
Look at the total cost over your expected holding period, not just the headline rate — including fees, early settlement terms, and how the profit rate is calculated. Use the mortgage calculator to model both options against the same loan amount and term. For structural differences, see Ijara vs Murabaha.
Who tends to benefit from comparing both
- Buyers with no religious preference who simply want the lowest total cost
- Non-residents, since some Islamic banks price competitively for cross-border applicants
- Anyone deciding between banks that only offer one structure each
Run the numbers on your own case
Free Lenddoo tools and guides related to this article.
Last reviewed 22 July 2026