Frequently Asked Questions

Islamic finance is a financial system that operates according to Sharia (Islamic law). It prohibits interest (riba), uncertainty (gharar), and gambling (maysir). Instead of interest, Islamic finance uses profit-and-loss sharing arrangements, such as Musharaka (partnership) and Mudaraba (profit sharing), as well as asset-backed financing like Murabaha (cost-plus) and Ijara (leasing).

Yes, Islamic home finance is considered halal and is widely recognised as a Sharia-compliant alternative to conventional mortgages. Islamic home loans in Australia typically use the Murabaha (cost-plus) or Ijara (leasing) structure, where the lender purchases the property and sells it to the borrower at a profit, or leases it with the option to own. This differs fundamentally from conventional mortgages that charge interest.

In Australia, Islamic home loans typically work through one of these structures:

• Murabaha (Cost-Plus): The lender buys the property and sells it to you at a profit margin. You repay in fixed monthly instalments over the agreed term.
• Ijara (Leasing): The lender buys the property and leases it to you. You pay monthly rent plus a portion that goes towards purchasing the property. At the end of the term, ownership transfers to you.
• Musharaka (Diminishing Partnership): You and the lender jointly own the property. You gradually buy out the lender's share while paying rent on their portion.

Typically, you'll need:

• Proof of identity (driver's licence, passport)
• Proof of income (payslips, tax returns, employment contract)
• Bank statements (usually last 3-6 months)
• Details of existing debts or liabilities
• Proof of deposit/savings
• Property details (if already selected)

Yes, most Islamic finance providers in Australia offer pre-approval. This gives you an indication of how much you may be able to borrow based on your financial situation. Pre-approval is typically valid for 3-6 months and helps you understand your budget when house hunting.

Islamic car finance (Murabaha) works by the lender purchasing the vehicle and selling it to you at a profit margin. You repay in fixed monthly instalments. This is fundamentally different from conventional car loans, which charge interest. The total amount you repay is agreed upon upfront, with no hidden interest charges.

SMSF Islamic investment allows you to use your Self-Managed Super Fund to invest in Sharia-compliant properties. This means your retirement savings can be used to purchase investment properties without violating Islamic principles. The property must generate halal income, and the investment structure must avoid interest-based arrangements.

Like conventional finance, Islamic finance may involve various fees including:

• Application or establishment fees
• Valuation fees
• Legal fees
• Settlement fees
• Early exit fees (if applicable)

These fees should be disclosed to you upfront. It's important to compare the total cost of finance, not just the monthly repayments.

The approval time varies depending on the complexity of your application and the provider. Typically:

• Pre-approval: 1-3 business days
• Full approval: 1-3 weeks
• Settlement: 2-6 weeks after approval

Having all your documents ready can help speed up the process.

Yes, you may be able to refinance from a conventional mortgage to Islamic finance. This process is called "refinancing." BARAQAH can help you assess whether switching makes financial sense for your situation, considering exit fees from your current lender and the costs of establishing new Islamic finance.