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Conventional and an Islamic Mortgage
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What is the Difference Between a Conventional and an Islamic Mortgage

Holo Blog

When you make an application for a mortgage in Dubai you will have the choice between applying for a conventional or an Islamic mortgage. Here we explain the difference between the two types of mortgage, so you can make the decision that is best for you. Holo partners with all the banks in the UAE so when you are ready to take the next step in your real estate journey, we've got you covered.

What is a conventional mortgage?

With a conventional mortgage, the bank will lend you the money to finance your new home.

A conventional mortgage is made up of the principal (the amount borrowed) and the interest charged on the loan. With most mortgages, the principal and interest are paid off monthly over a fixed term, usually 25 years.

To begin with most of your repayments are allocated against paying off the interest with a smaller proportion set against reducing the principal amount borrowed. As the end of your repayment term approaches this changes and more is paid off from the original loan balance each month.

What is an Islamic mortgage?

An Islamic mortgage is designed for those who want to buy a property, but prefer to go down a halal route when applying for a mortgage. Islamic mortgages are also referred to as Shariah compliant mortgages.

Under Sharia Law, banks are forbidden from charging interest on a loan. With an Islamic mortgage you'll essentially be in partnership with the Islamic bank or Shariah compliant lender, paying rent on a monthly basis. Each payment will increase your ownership share of the property, and reduce the bank's financial share.

There are several financing models for an Islamic mortgage. In the UAE the Murabaha and Ijarah models are the two most common.

With a Murabaha mortgage, the bank will buy the property on your behalf and then sell it back to you. You will pay the bank in monthly installments. With an Ijarah mortgage, the bank will buy the property and lease it back to you. Top tip: this may be a good option if you are buying a property off-plan as no repayments will be due until the property is complete.

Do I need to be Muslim to take out an Islamic mortgage?

No. An Islamic mortgage is for everybody and simply offers a Sharia compliant way of buying a home. While an Islamic mortgage is designed specifically to cater to Muslim beliefs, Islamic banks serve both Muslim and non-Muslim customers. As with any mortgage, you should take the mortgage that offers the best rate for you, your goals, and your circumstances.

How do I know whether my bank offers an Islamic mortgage?

Most banks in the UAE will offer Islamic mortgages and finance options. However, don't assume your bank can offer you the best deal. It's a common misconception that your bank can offer you the best terms if you are an existing customer. This simply isn't true. A different bank to the one you use for your salary transfer, business, or day to day banking needs, may provide a better alternative for you. Consider all your options and let Holo help.

How do I know what the best options for me are?

Before you start the home-buying journey, you should work out how much you can afford to borrow. Use a mortgage calculator in Dubai such as Holo's mortgage calculator to help you do this. Our calculator will ask you a handful of quick questions about your income and your home-buying requirements, and then, in less than two minutes, you'll receive a selection of products that suit your profile.

When you use our calculator, we'll ask you whether you would like to see Conventional or Islamic mortgage products. You can also choose to see both types of mortgage when you use our digital mortgage platform. Holo works with all the banks in the UAE so we'll search all the mortgage products in the market for you, saving you time researching your options. You can be sure you're getting the best products and the best deal in the market whether you are applying for an Islamic or a Conventional mortgage.

Still got questions? 

Don't worry. Once our calculator has gathered your information and captured your requirements, you'll be assigned your own Holo Mortgage Consultant. They're friendly, experts and impartial. They'll be on hand to answer all your questions and walk you through all of your options. Best of all, our service is 100% free. Head to to get started.

This blog is for educational purposes, but everyone's case is unique, and local guidelines and regulations may change. Our mortgage advisors can help you with any question you may have and have the latest advice. Get in touch.

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