The murabaha mortgage is often used in commercial property finance structures by the Islamic banks (Al Rayan, Gatehouse, Al Ahli United, BLME etc) including buy-to-let mortgages as well.

Murabaha itself is a simple concept. The bank buys the property on your behalf, and then sells it to you immediately for a marked-up price, to be paid over a number of years. For more details on this structure, see here.

However, certain Islamic banks, e.g. Gatehouse, use commodity murabaha (also known as “tawarruq”) to structure their commercial property financing transactions. This is not ideal as an Islamic structure for reasons explained in this article. In a nutshell, this kind of structure is only in line with the sharia in form, but not in spirit.

You can compare the Islamic mortgages available in the UK here.

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