A conventional mortgage is straightforward: you borrow money from a bank, repay it with interest over time, and the bank secures the loan against your home. If you don’t pay, they can take the property. It’s a long term debt, often lasting decades, and can even outlive you, passing on the riba debt to your loved ones.
Islamic mortgages are structured differently to avoid interest (riba). Instead of lending money, the bank typically buys the property and then:
gradually sells its share to you over time, and
charges you rent for living in the portion it still owns.
On the surface, this looks different from a traditional mortgage. However, this is where the main criticisms come in.
- It can resemble a conventional riba loan in practice.Although structured differently, the end result can look very similar to a normal mortgage. You still make regular payments over time that feel like repaying a debt with added cost. This creates a “grey area” for some Islamic scholars and customers.
- Lack of true risk sharing. In a genuine partnership, both parties share risk. For example, if two people co-own a car and it’s destroyed, both lose out. But in many Islamic mortgage models, the bank avoids real risk, just like conventional banks. Contracts often require the buyer to still repay the bank even if the property is damaged or destroyed. This makes it feel less like a partnership and more like a debt obligation.
- Combining multiple contracts. Islamic mortgage structures often involve two linked agreements:
one for buying the property (ownership), and
one for renting it (usage).
Some Islamic scholars are concerned because combining contracts in this way can be used to recreate interest / riba based outcomes. The Prophet Muhammad (peace and blessings be upon him) prohibited the combination of contracts. A simple example shows how two buy/sell contracts can effectively mimic a loan with interest, even if no interest is explicitly stated.
This is why some muslim critics argue that these products may follow the letter of Islamic law, but not always its spirit.
Why do Islamic banks use this model?
Islamic banks face real constraints:
Regulation: Banks must protect depositors’ money. To guarantee returns, they rely on debt structures rather than true risk sharing partnerships.
Practical limitations: A fully risk sharing model is harder to implement within modern financial systems which are built around the sin of riba.
Why Islamic mortgages can be more expensive?
Two main reasons:
Islamic banks are smaller and don’t benefit from the same economies of scale as large conventional banks like HSBC or Barclays.
Their costs of raising capital are often higher, which gets passed on to customers.
Riba is so hegemonic / demonic that it has made life incredibly difficult for billions of people. It is one of the main reasons why home prices are astronomical in many parts of the world, and it is at the forefront of war financing.
One day the world will be free from the chains of riba.
Insha’Allah.
Raza Ullah from Pfida:
Moro Blanco 
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