Islamic Mortgages

The documented history of the Islamic presence in Ireland goes back to the 1950’s. This was represented in the trickle of Muslim student’s who came to Ireland to study medicine at the Royal College of Surgeons in Dublin. Before this time very little or nothing is known about Islam and Muslims in Ireland.

Now Muslims represent a significant portion of the population and their presence is being felt in the property market.  It is against Islamic law to pay or receive interest.  This has been a problem for Muslims living in non Muslim countries. Recently, a leading Irish Bank has been asked to extend to this jurisdiction, a special "Islamic mortgage" package, which it already provides for the Muslim population in the UK.

A Brief Overview of Statistics

Initially, Muslims came for education, first from South Africa, then other students followed from India, Malaysia and the Gulf states. In the 1970’s a number of trainees in aircraft engineering came to Ireland from Algeria, Libya, Saudi Arabia and Malaysia. When a number of students decided to reside in this country for work, and with the arrival of a number of Muslim businessmen and traders from the U.K., the first resident Muslim community in Ireland was formed. For many years the community was relatively small. According to the Irish census for 1991 the number of Muslims was 3,873. Since 1991 the number of Muslims increased considerably after the arrival of Muslim refugees from Bosnia, Somalia and Kosovo, as well as asylum seekers and professionals and workers from various Islamic countries There are, still, a good number of students mainly from Malaysia, the Gulf states and Pakistan. There are an estimated  2,000 medical doctors. The rest are businessmen, professionals, workers, asylum seekers, children, housewives and others. There is a number of Irish Muslims who accepted Islam and some European Muslims. According to the Irish census 2002 the number of Muslims was 19147. The total population of Ireland was 3,917,203. As for the nationalities of Muslims living in Ireland and their countries of origin, there are over 40 nationalities represented in the community at present. As to the ideological belonging of Muslims in Ireland the vast majority are Sunni Muslims. There is a community of Shi’at Muslims from Iran, Iraq, Lebanon, Pakistan and some Gulf states.

When it came to home buying it was only the very rich, who could afford to buy a home outright. Fortunately, however, many banks and building societies are starting to recognise this as a problem and are offering an alternative. There are two options available that correspond with Muslim law:

•The Murabaha (Deferred sale finance) Mortgage

•The Ijara (lease to own) Mortgage

The Murabaha Mortgage:

This is only really an option for individuals/families who have a fair amount of capital behind them, because it is a condition of this mortgage package that purchasers are expected to pay (circa.) 20% of the property’s value, on the day of purchase. However, from that day, the house will be registered in the purchaser’s name. The buyer may pay off any debt that is outstanding on the property at any point. This package offers a fixed repayment period that is agreed between the buyer and lender, and a monthly repayment amount that is fixed for the term of the mortgage.

So, how does the Murabaha Mortgage work? When a buyer finds the house that they wish to buy, they arrange a sale price with the vendor as normal.  However the bank pays the purchase price, then immediately sells the house to the buyer at a higher price (the higher price is determined by the original price of the property, and the repayment period that the buyer has agreed with the lender), minus the percentage  paid as deposit.

The Ijara Mortgage:

This is a slightly more popular choice of mortgage, as the buyer does not need a large amount of capital behind them to set it up.  This particular type of mortgage is also slightly more flexible than its counterpart. An extra benefit to this mortgage is that it can even be taken out to replace an existing interest mortgage. The amount, paid each month, is usually fixed yearly. The outstanding balance can be paid off at any time (usually) without incurring any penalties.

How does the Ijara Mortgage work? As with the Murabaha mortgage, a buyer finds a property that they wish to buy, and agrees a purchase price with the vendor, the difference is that; the lender will then purchase, and gain ownership of the property. The buyer will enter into a lease agreement with the lender. Each month the buyer will be expected to pay rent to the lender and a contribution towards the purchase of the property.

The increasing cultural diversity we are experiencing in Ireland is forcing some of our major financial institutions to be more creative in developing their products and services. Competition for business and the introduction of  more creative services should benefit all consumers in the long-term. If you are aware of  or provide any other unusual property related products or services please email us at newsletter@privateseller.ie and we’ll let others know about your service.