Understand Ijara in the UK: how it works, eligibility, costs, risks, and alternatives, so you can choose a Sharia-compliant path to buying or investing in property with confidence.
A clear, halal path to owning your home
Ijara home purchase plans offer a Sharia-compliant, lease-to-own route for UK buyers. Instead of borrowing money with interest, an Islamic bank or specialist lender buys the property and leases it to you. Your monthly payment is split into two parts: rent for the bank’s share and a separate amount that gradually acquires the property for you. When the term ends and all acquisition amounts are paid, full ownership transfers to you. It is designed to avoid interest while giving a clear, structured path to ownership under UK regulation.
Compared with conventional mortgages, Ijara usually asks for a larger deposit - often 20% or more - with some lenders allowing lower deposits at the cost of higher monthly rent. The market is still relatively small in the UK, so fees and monthly payments can be higher than mainstream deals, and waitlists can occur. Despite this, availability is improving in 2025 as more providers enter or return, widening choice for halal finance.
No jargon, no pressure - just a steady route to a home that aligns with your values.
It is important to understand how Ijara differs from other Islamic options. Diminishing Musharaka steadily increases your ownership month by month from day one, while Ijara keeps your ownership path straightforward through lease payments plus acquisition amounts. If your aim is clarity, predictability, and avoiding interest, this structure can be appealing. If you might move early, you will need to check early exit terms carefully.
This guide explains who Ijara can suit, how the numbers stack up, how to qualify, and the practical steps from enquiry to completion. It also flags areas where careful legal and Sharia review matters, so you can proceed with confidence.
Who it suits
Ijara can be a strong option for UK Muslims who want homeownership that aligns with their faith. It also suits anyone who prefers an interest-free structure with a transparent lease-to-own path and clear end ownership.
Buyers with solid deposits and stable income may find the affordability checks more straightforward. Self-employed buyers can also be considered by specialist lenders who understand complex earnings. For investors, buy-to-let Ijara may suit those seeking halal rental income, provided the property meets standard UK criteria and has a sufficient lease term if leasehold.
If you are mid-journey on a conventional mortgage and want to move to a Sharia-compliant plan, remortgaging into Ijara can be possible, subject to valuation, affordability, and legal review.
Your choices at a glance
- Residential Ijara (Home Purchase Plan) - live in the property and acquire ownership over time.
- Buy-to-Let Ijara - acquire an investment property and collect rent from tenants.
- Lower-deposit Ijara - from some lenders, with higher monthly rent and tighter criteria.
- Remortgage to Ijara - switch an existing mortgage or HPP to an Ijara structure.
- Fixed or variable rental rates - choose how your rental portion is set and reviewed.
Costs, impact and risk profile
| Item | Cost | Impact | Returns | Risks |
|---|---|---|---|---|
| Deposit level | Typically 20%+ of price | Higher upfront cash needed | Reduces monthly rent portion | Low deposit options increase monthly costs |
| Monthly payments | Rent + acquisition amount | Predictable path to ownership | Builds equity as acquisition accrues | Rental rate reviews can raise payments |
| Fees | Arrangement, valuation, legal, admin | Raises total purchase cost | Professional due diligence | Limited lender competition can keep fees higher |
| Early exit/transfer | Possible but subject to terms | Costs if moving sooner than planned | Flexibility if circumstances change | Early settlement/lease exit charges may apply |
| Property type limits | Leasehold needs long remaining term | Affects property choice | Wider resale pool if compliant | Non-standard properties may be excluded |
| Buy-to-let vacancy | Tenant gaps reduce income | Impacts cash flow planning | Long-term rental growth potential | Voids and repairs sit with landlord |
Can you qualify?
Lenders apply standard UK affordability checks, assessing income, outgoings, and credit behaviour. A typical residential Ijara needs a deposit of at least 20%, although a few providers consider lower deposits with stronger affordability and higher rent. You will need proof of ID and address, bank statements, payslips or self-employed accounts, and details of any existing credit commitments. Residency and visa status are considered; some lenders also support expatriate income for higher-value UK properties, subject to specialist structuring.
Properties must be suitable security. Freehold houses are common, while leasehold flats usually require at least 50 years remaining beyond the end of the plan, and service charges or ground rent are factored into affordability. For buy-to-let Ijara, rental coverage tests apply much like mainstream BTL.
Because Ijara contracts differ from conventional mortgages, independent legal advice is essential. Many buyers also consult Sharia scholars to ensure the agreement fits their understanding. If you want help comparing lenders, fees, and criteria across the UK, Kandoo can introduce you to regulated advisers with whole-of-market access to Islamic home purchase plans.
The journey in simple steps
- Outline your budget, deposit, and property goals.
- Speak to a regulated Islamic finance adviser.
- Obtain an Agreement in Principle for affordability.
- Find a suitable property and make an offer.
- Lender purchases, legal due diligence progresses.
- You sign lease and acquisition documents.
- Completion takes place and payments begin.
- Ownership transfers fully when term ends.
Weighing it up
| Aspect | Pros | Cons |
|---|---|---|
| Faith alignment | Avoids interest, Sharia-structured | Requires scholarly comfort with documents |
| Ownership path | Clear lease-to-own journey | Less flexible if moving early |
| Deposits | Strong equity from day one | Typically 20%+ needed |
| Market choice | Growing UK options in 2025 | Fewer lenders, potential higher costs |
| Remortgage route | Switch from conventional mortgage | Valuation and fees apply |
| Buy-to-let option | Enables halal rental investment | Rental voids and repairs reduce returns |
What to keep an eye on
Market choice is improving, but the number of UK Islamic lenders remains limited compared with conventional mortgages. That can mean higher fees and less room for negotiation, so comparing total cost over the full term matters more than headline rates. Pay attention to how rental rates are reviewed and how that affects monthly payments over time.
Legal precision is vital. Ijara contracts are not the same as Murabaha or Diminishing Musharaka, and wording differences change your obligations. Work with a solicitor experienced in Islamic home purchase plans, and consider a Sharia review if you want added assurance. If you might move sooner than expected, ask for a clear breakdown of early exit costs and any restrictions on sale or letting.
Alternatives to consider
- Diminishing Musharaka - shared ownership that gradually increases your share monthly.
- Murabaha - cost-plus purchase with fixed profit, often for shorter terms.
- Conventional repayment mortgage - wider lender choice and potentially lower costs.
- Shared ownership (non-Islamic) - buy a share and pay rent on the rest.
- Saving longer for a bigger deposit - reduce monthly costs and fees later.
Frequently asked questions
Q: How is monthly payment calculated in Ijara? A: It has two parts. One is rent for the bank’s share, set by an agreed rental rate. The other is an acquisition amount that builds your ownership over time.
Q: Is a 20% deposit always required? A: It is typical, but not universal. Some lenders consider lower deposits, though monthly rent can be higher and affordability checks may be tighter.
Q: How does Ijara differ from Diminishing Musharaka? A: With Ijara, ownership transfers at the end after you make acquisition payments alongside rent. Diminishing Musharaka increases your ownership portion gradually from the start.
Q: Can I remortgage from a conventional mortgage to Ijara? A: Yes. The Islamic lender purchases the property and starts a home purchase plan. You will need standard documents, a valuation, and legal work to complete the switch.
Q: Are buy-to-let properties eligible? A: Yes, subject to lender criteria. Rental coverage, property condition, and lease length for flats are assessed. You remain responsible for voids, maintenance, and compliance.
Q: Are Ijara plans FCA regulated? A: Yes. UK Ijara home purchase plans are regulated as Home Purchase Plans. Always work with FCA-authorised firms and solicitors experienced in Islamic finance.
Ready to explore?
If you are weighing Ijara against other routes, a regulated adviser can break down the numbers side by side and confirm suitability. Kandoo can introduce you to UK experts who understand Islamic home purchase plans, with access to specialist lenders. Start a no-obligation conversation, sense-check eligibility, and map out a clear path from today’s deposit to tomorrow’s keys.
Important information
This guide is for general information only and is not personal advice. Eligibility, costs, and tax depend on your circumstances. Always seek independent legal, Sharia, and regulated financial advice before committing to any home purchase plan.
Get smarter with your money
Join thousands of people in the UK who are taking control of their financial future
FAQs
Common questions about managing your personal finances
Begin by tracking every expense for one month. Use an app or spreadsheet. No judgment. Just observe your spending patterns.
Cancel unused subscriptions. Cook at home. Compare utility providers. Small changes add up quickly.
Aim for 20% of your income. Start smaller if needed. Consistency matters more than the amount.
Choose reputable apps with strong security. Read reviews. Check privacy policies. Protect your financial data.
Pay bills on time. Keep credit card balances low. Check your credit report annually. Be patient.
Still have questions?
Our team is ready to help you navigate your financial journey
More financial insights
Explore our latest articles on personal finance and money management
