The Ijarah difference


How is Ijarah Different?

The main difference between buying a property through a Conventional Mortgage and buying a property through Ijarah Finance is that no exchange of money is taking place and thus no interest is being charged or paid. 

The term Ijarah is synonymous with Lease. Hence the property is purchased on behalf of the client and the client leases it from the financier by making regular rental repayments, with the view of taking legal ownership of the property once the payment terms have been met. 

Comparison table

Mortgage Loan Ijarah Finance
Funding Purpose Purchase Residential Owner Occupier property
Purchase Residential Investment property
Purchase Vacant Land & Construct a Residential home
Purchase Motor Vehicle
Purchase shares for personal investment
Other personal requirements
Purchase Residential Owner Occupier or Investment property
Refinance Owner Occupied or Investment property
Construct a Residential home
Purchase Vacant Land & Construct a Residential home
Purchase & Refinance Commercial Property
Purchase: Motor Vehicle, Trucks, Trailers, Cranes, Plant Equipment, Machinery, Yellow Goods, White Goods , Business Equipment, Office Equipment, Fit Out
Facility Loan to Purchase Rent to Own
Ownership Transferred immediately upon settlement. Legal Title held by the Client.
Once final instalment is made by the client, the funder will transfer ownership to the client.
Client holds the property as an agent of the financier and is responsible for the maintenance and upkeep of the property.
Loan Amount The maximum is dependent on the borrower's ability to repay and the LVR. The maximum is dependent on the borrower's ability to repay and the LVR.
Term One to five years.
Up to 30 years, more commonly 25 years.
Up to 30 years
Rate Type Fixed or Variable An agreed variable rate disclosed upfront. The funder will give 30 days notice to any changes to the rate.
There are no break costs while the rate is variable. The client is free to refinance without incurring break cost fees because the rate is variable.
With a fixed rate facility, you can have it fixed for 1 - 5yrs depending on your preference. Break cost can/will apply if the facility is fixed.
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