Dubai differs from the UK in many ways. These differences should be celebrated, and immersing yourself in Arab culture can open your eyes to its rich heritage.

One thing that does trip up a few British expats though is the difference between Sharia and conventional mortgages.

If you aren’t a Muslim, you don’t need to apply for a Sharia compliant mortgage. There are plenty of banks in Dubai that offer conventional options. However, Sharia mortgages might actually be better suited to you, so you shouldn’t rule them out.



To help you decide whether to go for a Sharia compliant mortgage or a conventional mortgage, we have put together this guide explaining how each option works.

What is a Conventional Mortgage?

Conventional mortgages work on this premise. A bank lends you money to purchase a property. In Dubai, expats can borrow up to 80% of the purchase price for properties that cost AED 5 million or under.

In exchange, the bank will charge you a percentage of interest based on how much you borrow. You make these payments monthly over the course of your mortgage (let’s say 25 years), and once all the money has been paid back to the bank, the house belongs to you.

What is a Sharia Compliant Mortgage?

Sharia mortgages work differently, and you may have heard them being referred to as Islamic or Halal mortgages. Under Sharia Law, Islamic institutions are forbidden to charge interest on loans.



In Islam, lending money to make a profit is considered haram (or sinful). Instead, there are structures in place to make mortgages halal (or lawful). The two most common Islamic mortgage options are Murabaha and Ijarah

How Does a Murabaha Financing Agreement Work?

A Murabaha financing agreement is when a bank or lender purchases a property on your behalf and then resells it to you for a profit. You then pay the lender back through monthly installments.

Your bank will need collateral in case you miss payments, so the property will be registered to the lender until you have made all the payments.

A Murabaha structure could work in your favour more than a traditional mortgage. There are no additional charges for late payments, as this would count as making money from a loan.


What is Ijarah Financing?

Ijarah financing is a buy and lease-back payment structure. You and the bank will own the property jointly, and you buy out the bank over the next few years.

Here’s an example:

You purchase a property worth AED 1 million. You pay AED 200,000 with the bank paying AED 800,000. This leaves you with 20% of the property and the lender with 80%.

The next year, you pay the bank another AED 200,000. Your share of the property is now 40% and the bank’s is 60%. This structure carries on until you own all of the property.

This structure is particularly useful if you’re looking to purchase off-plan, as no patent needs to be made until the property is completed.

Sharia Compliant Mortgage or Conventional?

Whether you should choose an Islamic mortgage option or one you’re more accustomed to as an expat will depend entirely on your circumstances. You’re under no obligation to go with a Sharia mortgage, but you might find it more beneficial in the long-run.

The best way to determine which option is right for you is through having a consultation with an experienced mortgage broker based in Dubai. Make sure to get in contact with us for advice and guidance.