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 buy that share over time. Some providers accept overseas buyers: some finance foreign nationals living abroad, others only British citizens living abroad or residents of the Gulf countries.
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 |
| Murabaha | The provider buys the home and sells it to you in instalments at cost plus a profit agreed in advance. | Yours from the sale |
In all three models your payment is defined as rent or sale profit, not interest. The rental rate follows market conditions and in practice is close to, and often slightly above, the rate of a comparable conventional mortgage.
Options for people living abroad
| Buyer profile | Main terms |
|---|---|
| Foreign national living abroad | Homes in England and Wales. Up to 80% of the price (up to £2 million), 75% up to £3 million, 70% up to £5 million; up to 75% on a new-build flat. Finance starts at £75,000, minimum annual income £25,000. |
| British citizen living abroad | Homes in England and Wales. Up to 80% of the price; minimum finance starts from £60,000 depending on the provider. A new provider began offering home purchase plans to this group in 2026. |
| Resident of the Gulf countries | Homes in England and Wales. Up to 75% of the price, finance between £100,000 and £2.5m. |
| UK resident for at least two years | Up to 90% of the price. This option is closed to buyers living abroad. |
Some providers do not publish their rates, amounts or deposit requirements and ask for a direct conversation. Buy-to-let (investment) plans need a larger deposit and at most providers fall outside FCA regulation. Product terms change often; confirm the current criteria before you apply.
Is it FCA regulated? Residential home purchase plans have been regulated by the FCA since 6 April 2007, so you can take a complaint to the Financial Ombudsman and the adviser you used is covered by the FSCS. Buy to let plans usually fall outside that. Some providers state on their own site that they are not regulated at all, so check this before you sign.
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. Some providers offer Sharia-compliant finance to foreign nationals living abroad for homes in England and Wales, up to 75% of the price on a new-build flat and with a minimum annual income of £25,000.
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, the total cost of buying a home in the UK and Can I buy a home in Dubai with a mortgage.
Sources
Rates and terms are taken from the providers’ own home finance pages, and buy-to-let deposit ranges from industry round-ups (September 2026). Product terms may change.
How we help you with this
As capital.works®, the Overseas Property Centre, we represent selected developments in England. Every development live on the site has 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 conveyancing and contract process is handled by a solicitor registered in England. Our company is registered with the FCA (FRN 1049015) and a member of the NACFB.
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.