Visualise Your Equity
See exactly how a Halal Purchase Plan (HPP) turns your monthly payments into asset ownership over time.
Scenarios
Equity Growth Projection
How much of the house do you actually own over 25 years?
Diminishing Musharakah Explained
Most Halal mortgages in the UK (like Gatehouse, Al Rayan) use a model called Diminishing Musharakah (Decreasing Partnership).
- You and the Bank buy the house together (e.g. 20% you, 80% them).
- You live in the house and pay Rent to the bank for using their 80%.
- You also pay an extra amount to buy back their shares.
- Over time, your rent decreases (because you own more), and your equity increases.
Why does it look like interest?
Critics (and you!) might notice the rates look identical to interest rates. Ideally, Islamic banks would base rent on local rental markets.
However, due to regulations and competition, they usually benchmark against the Bank of England Base Rate. This mimics the cost but the contractual validity is Halal because it is a trade/lease contract, not a loan.
How is this different from a normal mortgage?
In a conventional mortgage, you borrow money and pay interest. The bank lends you cash. In an HPP (Halal Purchase Plan), the bank buys the property *with* you. You pay 'Rent' on their share, and buy their share out slowly. You are paying for *usage*, not borrowing money.
Is it more expensive?
Often, HPP rates track the LIBOR/Base Rate, similar to conventional mortgages, to stay competitive. However, the *structure* protects you from negative equity risks differently and avoids the sin of Riba.