Mortgage basics
What is an Islamic mortgage in the UAE?
A UAE Islamic mortgage is Shariah-compliant home finance, usually structured as Ijara (lease-to-own) or Murabaha (cost-plus sale). Instead of charging interest, the bank earns a disclosed profit rate, and pricing is broadly comparable to conventional mortgages available from the same banks.
How Islamic home finance works
Rather than lending you money at interest, the bank buys the property and either leases it to you (Ijara) with ownership transferring at the end of the term, or resells it to you at a disclosed mark-up payable in instalments (Murabaha). Both avoid interest, replacing it with a transparent profit rate agreed upfront and approved by the bank's Sharia supervisory board.
How it compares to conventional mortgages
Day to day, an Islamic mortgage feels similar to a conventional one: you make monthly payments, the property is used as security, and eligibility criteria on income and deposit are broadly the same. The core difference is the underlying structure and the fact that late payments are typically treated as charity contributions rather than interest penalties or compounding interest.
Islamic vs conventional at a glance
| Feature | Islamic (Ijara/Murabaha) | Conventional |
|---|---|---|
| Pricing basis | Profit rate | Interest rate |
| Ownership during term | Bank (Ijara) or you (Murabaha) | You, with a bank charge |
| Late payment treatment | Charity contribution | Interest-based penalty |
| Early settlement cap | 1% of balance or AED 10,000, lower of the two | 1% of balance or AED 10,000, lower of the two |
| Open to non-Muslims | Yes | N/A |
Who it suits
- Buyers who want a Shariah-compliant structure for religious reasons
- Buyers open to either structure who simply want competitive pricing
- Non-resident buyers, since several Islamic banks lend across borders
- Anyone comparing costs, since pricing is generally close to conventional rates
How to apply
- 1Get an indicative pre-approval across Islamic and conventional banks together
- 2Compare the profit rate, fees and early settlement terms side by side
- 3Choose Ijara or Murabaha based on which the bank offers and which structure suits you
- 4Complete the same documentation, valuation and registration process as a conventional mortgage
Run the numbers on your own case
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Last reviewed 14 July 2026