Halal alternatives to traditional mortgages

Buying a home without interest: what that really means

Sharia-compliant home finance allows you to buy a property without paying or receiving interest. Instead of a debt with interest, you enter a partnership or purchase arrangement where costs are transparent and linked to the property itself. That can feel very different from a traditional mortgage, yet the end result is similar: you build equity over time and eventually own the home outright.

Across the UK in 2025, providers are expanding choice. Banks and specialist firms offer options built on models such as Ijara, Diminishing Musharakah, and Murabaha. You will see familiar names like Gatehouse Bank and StrideUp, plus newer entrants such as Offa. There are also ethical alternatives like Pfida and flexible shared ownership routes like Heylo. Some providers focus on green properties, reflecting a growing link between stewardship and sustainability.

Costs are typically framed as rent on the provider’s share or a marked-up sale price agreed at the outset. Payments are designed to be clear and predictable. You will not be charged interest, but you will pay rent or a profit rate that reflects the provider’s stake and risk. Eligibility checks remain thorough, with assessments tailored to UK employment patterns, including contractors and the self-employed.

The choice is wider than it used to be, and that is good news if you value faith alignment and ethical finance. The key is understanding how each structure works so you can weigh affordability, flexibility, and long-term ownership.

The right halal option should feel transparent from day one - how you pay, when you build equity, and what happens if things change.

Confidence comes from clarity. Let’s walk through who this suits, what the main options are, and how to take the next steps safely.

Who this guide is for

If you are a UK resident who wants to avoid interest, this guide is for you. That includes Muslim buyers seeking fully Sharia-compliant routes and ethical non-Muslim buyers who prefer partnership over debt. It also suits first-time buyers with modest deposits, families using gifted deposits, and self-employed people who want fairer treatment of variable income. If you are remortgaging into a halal structure, refinancing a buy-to-let, or building a small property portfolio, you will find relevant pathways here. The focus is plain English, practical steps, and transparent comparisons so you can choose confidently.

Your main routes to halal homeownership

1. Ijara leasing with equity payments - the provider buys the property, you pay rent plus equity acquisition payments until full ownership.
2. Diminishing Musharakah or Home Purchase Plans - you co-own with the provider and gradually buy out their share while paying rent on theirs.
3. Murabaha marked-up sale - the provider purchases the property and sells it to you at an agreed profit, repaid in instalments.
4. StrideUp halal co-ownership - interest-free, accepts 10 percent deposits and flexible incomes, Sharia-certified for UK buyers.
5. Gatehouse Bank HPPs - co-ownership with competitive rates and deposit options, strong ethical screening.
6. Pfida debt-free shared ownership - flexible buy-back without debt structures, helpful for non-standard incomes.
7. Heylo flexible shared ownership - no forced staircasing, higher rates but strong control over when you buy more.
8. Green Islamic options - emerging products linking stewardship with energy-efficient homes and incentives.

What it might cost and the trade-offs

Who usually qualifies

Eligibility depends on the provider and product. Expect standard UK residency checks, credit assessments, and anti-money laundering processes. Many halal providers consider salaried, self-employed, contractors, and limited company directors, though evidence requirements differ. Some accept gifted deposits and allow deposits from 5 to 10 percent, with higher deposits improving terms. Properties must be suitable for residential lending, and some providers restrict new builds, ex-local authority, or non-standard construction. Ethical screening typically excludes haram-linked income sources.

StrideUp is often flexible with variable income, helpful for freelancers and contractors. Gatehouse’s Home Purchase Plans can be competitive for mainstream borrowers, sometimes with lower deposits. Pfida may suit those underserved by banks, particularly if income does not fit standard underwriting. If you are improving a property’s energy rating, look out for green incentives.

If you need help comparing affordability or documents, Kandoo can introduce you to FCA-regulated brokers who understand halal finance and can explain each route in clear terms.

What happens from enquiry to keys

1. Check affordability and set a realistic budget.
2. Choose a halal model that fits your situation.
3. Obtain a Decision in Principle from a provider.
4. Make an offer on a suitable UK property.
5. Complete valuation and legal due diligence.
6. Final approval, sign agreements, and pay deposit.
7. Exchange contracts and schedule completion date.
8. Move in and begin buy-back or rent payments.

Benefits and trade-offs at a glance

Read this before you commit

Take time to understand how your rent or profit rate is set, when it can change, and what happens if your income falls. Ask for total cost over different timeframes, not only the monthly figure. If a product allows optional staircasing, check if delays increase total cost. Confirm fees for valuations, legal work, and early buy-back. Review property criteria, especially for flats, new builds, or unusual construction. Finally, test affordability with higher stress rates so you are comfortable if markets move.

A short conversation with a knowledgeable adviser can save you weeks later. Clarity now prevents surprises later.

Ethical paths beyond the main list

1. Family springboard or guarantor arrangements with halal structures.
2. Rent-to-own with clear, Sharia-compliant contracts.
3. Shared ownership via housing associations aligned to your ethics.
4. Lifetime ISA to boost your deposit for a halal product.
5. Remortgaging into a halal plan when your fixed deal ends.

Common questions, clear answers

Q: Is a halal home plan more expensive than a mortgage? A: It depends on the product and term. Some plans are now close to mainstream pricing. Always compare total cost over the period you expect to keep the property.

Q: Can I buy with a 5 percent deposit? A: Sometimes. Certain Home Purchase Plans have allowed 5 percent, though 10 percent is more common. Higher deposits usually improve affordability and pricing.

Q: Are these plans regulated in the UK? A: Yes. Providers and brokers operate under UK regulation. Sharia certification is separate and confirms the product complies with Islamic principles.

Q: Do self-employed applicants have a chance? A: Yes. Some providers assess contractors and freelancers more flexibly. Expect to provide bank statements, contracts, and accounts to evidence sustainable income.

Q: What if I need to sell early? A: You can usually sell, settle the provider’s share, and keep your equity. Check any early settlement fees and how rent or profit is calculated on exit.

Q: Can I invest in a buy-to-let halal plan? A: Certain providers support buy-to-let within Sharia structures. Criteria are stricter, and you should factor void periods, repairs, and rent coverage.

Ready to explore your options

If you want a personalised comparison, Kandoo can connect you with FCA-regulated advisers who specialise in halal and ethical home finance. They will explain costs in plain English, check eligibility quickly, and help you move forward with confidence.

No jargon, no pressure - just clear guidance that fits your goals.

Important information

This guide is for general information only and is not financial advice. Product availability, eligibility, and pricing change over time. Always seek advice from a regulated adviser before making commitments. Your home may be at risk if payments are not maintained.