Islamic Mortgage Calculator
Compare conventional and Shariah-compliant home finance options. See the real cost difference.
All Scenarios Compared
| Scenario | Monthly Payment | Total Cost | Total Interest/Profit | Term | Savings vs Baseline |
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Islamic vs Conventional — Honest Comparison
Conventional Mortgage
Islamic Finance
Balance Over Time — Top 3 Scenarios
Understanding Islamic Home Finance
Diminishing Musharakah
You and the bank co-own the property from day one. Your monthly payment covers two things: rent on the bank's share and a purchase of more equity. Over time, you own more and the bank owns less — hence "diminishing." Overpayments accelerate this buyout and reduce future profit charges. This is the most common structure in the UK and US.
Murabaha (Cost-Plus)
The bank purchases the property and immediately resells it to you at a fixed markup. Your total repayment is locked in on day one — there is zero rate risk. The downside: because the total is fixed, early repayment does not reduce your total cost the way it does with other structures. Common in Malaysia and the Gulf.
Ijara (Lease-to-Own)
The bank buys and owns the property, then leases it to you. Your payment includes a rental charge and a capital contribution that gradually transfers ownership. Economically, it behaves very similarly to a conventional repayment mortgage. The key difference is the legal structure — you are a tenant until the final payment.
Is Islamic Finance More Expensive?
Historically, Islamic home finance has carried a small premium — typically 0.3% to 1.5% above equivalent conventional rates. This reflects several factors: fewer providers means less competition, Shariah compliance adds legal and administrative costs, and the structures are genuinely more complex.
However, the gap has narrowed significantly. Some UK Islamic banks now offer rates competitive with mainstream lenders, and in a rising rate environment, a fixed Murabaha can actually be cheaper than a conventional variable-rate mortgage.
The calculator above lets you see the exact cost difference for your situation. For many borrowers, the premium amounts to tens of pounds per month — a cost many consider worthwhile for alignment with their values. The honest answer is: it depends on the provider, the structure, and the rate environment. Use real numbers, not assumptions.