Can You Buy a Home in the UK with an Islamic (Interest-Free) Mortgage?
Written by: Marcus M. Araz, MBA, PhD · Updated:
Yes. Islamic banks in the UK offer Home Purchase Plans based on co-ownership and rent rather than interest, and these products are also open to people living abroad. The bank buys the home together with you; you pay rent on the bank’s share and gradually buy that share. For buyers living abroad the main option is Gatehouse Bank: it finances homes in England and Wales, lends up to 75% of the price on new build flats and requires applicants living abroad to earn at least £25,000 a year.
How it works
| Model | How it works | Ownership |
|---|---|---|
| Diminishing partnership (diminishing musharaka) | You buy the home together, you with the deposit and the bank with the rest. You pay rent on the bank’s share and buy part of it every month, so the bank’s share and the rent fall over time. | Shared; fully yours at the end of the term |
| Ijara (lease) | The bank buys the home and leases it to you. You pay rent and pay the capital separately or at the end of the term, then take over ownership. | The bank during the term, you at the end |
In both models your payment is defined as rent, not interest. The rental rate is set by market conditions and in practice is close to, and often slightly above, the rate on a comparable conventional mortgage.
Options for people living abroad
| Provider | Open to | Key conditions |
|---|---|---|
| Gatehouse Bank | UK residents, UK expats and international residents | Homes in England and Wales; minimum finance £75,000; up to 75% on new build flats; minimum income £25,000 a year for applicants abroad |
| Al Rayan Bank | Residential and buy to let purchase plans; confirm the conditions for overseas applications with the bank | Minimum finance £200,000; up to 75% of the price |
For buy to let purchases the deposit is usually 25% to 35%. Product terms change often; confirm the current criteria with the provider or a mortgage adviser before applying.
Is stamp duty paid twice?
No. Although the co-ownership model involves two transfers in theory (seller to bank, bank to you), the UK’s alternative finance rules mean stamp duty is paid only once. The rates are the same as for a conventional mortgage purchase: a buyer who lives abroad and owns a home in another country pays the 5% higher rate for additional dwellings and the 2% non-resident surcharge on top of the standard rate. For your own figure, use our stamp duty calculator .
Tax on rental income
If you let the flat, the rent element you pay the bank is treated like interest for tax purposes. For individual landlords, finance costs are not deducted from income; instead a 20% tax credit applies, and the same rule applies to Islamic plans. Details are on our How much tax is paid on rental income in the UK page.
Is it permissible?
This is a religious question and we do not give religious rulings. The products of UK Islamic banks are offered with the approval of their own Sharia supervisory boards and are regulated by the Financial Conduct Authority (FCA). We suggest showing the product structure and contract to your own religious adviser.
Who it suits
- Buyers who do not want an interest-based loan and can pay at least 25% of the price upfront
- Those buying in England or Wales, especially new build flats accepted by the banks
- Those with regular, documented income abroad
It does not suit purchases in Scotland, very small flats (below the minimum finance amount) or applicants who cannot document their income. In those cases a cash purchase or a smaller flat may be more realistic.
Frequently asked questions
Is there interest-free home finance in the UK? Yes. Islamic banks offer interest-free home finance called Home Purchase Plans, based on co-ownership and rent. These products are regulated by the FCA.
Can someone living abroad get an Islamic mortgage in the UK? Yes. Gatehouse Bank also finances homes in England and Wales for foreigners living abroad, up to 75% on new build flats and with a minimum income of £25,000 a year.
How much deposit do you need for an Islamic mortgage? At least 25% on new build flats; usually 25% to 35% for buy to let.
Is an Islamic mortgage more expensive? The rental rate is usually close to, or slightly above, a comparable conventional mortgage rate. To compare total cost, ask for quotes on the same amount and term.
Is stamp duty paid twice with an Islamic mortgage? No. Thanks to the alternative finance rules it is paid only once.
Is buying a home in the UK with Islamic finance permissible? We leave the religious assessment to your own religious adviser. The products are offered with the approval of the banks’ Sharia boards.
Related pages
Can a Turkish citizen get a mortgage in the UK, Total cost of buying a home in the UK and Can I buy a home in Dubai with a mortgage.
Sources
Gatehouse Bank’s conditions are from the bank’s home finance page, and the Al Rayan figures and buy to let deposit ranges from the Islamic Finance Guru review (September 2026). Product terms can change.
How we help you with this
As capital.works®, the Overseas Property Centre, we represent selected developments in England. There are currently 80 English developments live on the site, each with its price list, floor plans and completion schedule on its own page. We are an FCA authorised credit broker (FRN 1049015) and a member of the NACFB; the purchase, the finance, residency and post completion management are all run by one team.
Legal notice
capital.works® (YATIRIM UK LIMITED) is a real estate advisory company; it does not provide legal or tax advice. The title and contract process is carried out by a solicitor registered in the UK. On the mortgage side, our FCA authorisation applies (FRN 1049015, authorised credit broker).
The next step
Tell us your budget, deposit and income, and together we will find projects suitable for Islamic finance and the total cost: Contact us.