Halal Home Financing Calculator
How do Murabaha and diminishing musharaka payments work — and how do they differ, in pure maths, from a conventional interest loan? Profit rate and rent in, instalments out.
Islamic home financing replaces interest (riba) on a money loan with a different contract. Three structures dominate. In Murabaha (cost-plus sale), the financier buys the asset, then sells it to you at a disclosed cost plus agreed profit, with a fixed total price paid in instalments. The total debt is fixed and does not grow with time. In Ijarah (lease), the financier retains ownership and leases the usufruct to you for rent; Ijarah Muntahia Bittamleek adds a separate ownership-transfer mechanism. In diminishing musharaka, you and the financier buy together, you lease the financier's share, and you gradually buy that share until you own 100%.
There is no single universal diminishing-musharaka monthly formula. Banks differ: some use equal buyout units, some hold the total payment level and shift the rent/buyout split. This calculator implements the textbook equal-unit model and labels it as such: each period you buy a fixed unit of the financier's share at the original price, and you pay rent only on the financier's remaining share, so the rent portion — and the total payment — falls over time. Your bank's schedule may differ. The conventional comparison below is maths only: a standard amortisation schedule at the same rate, shown so you can compare cash flows. It is not halal, and this page does not certify any product as halal. Scholars differ on specific products and on conditions for diminishing musharaka — check the provider's Shariah board. Use “profit rate / rent”, not “interest”, for the Islamic structures.
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How to use the result
- For Murabaha, the total is fixed — check that the agreed profit is a total, not an annual rate.
- For diminishing musharaka, expect payments to fall in this textbook model. If your bank holds payments level, its rent/buyout split differs — ask for its schedule.
- Do not read the conventional comparison as halal. It is there to compare cash flows, not contracts.
Frequently asked questions
Is a Murabaha profit the same as interest?
No, in contract terms. Murabaha is a sale at a disclosed cost plus profit, with a fixed total. Interest is a charge on a money loan. Critics note that benchmarking profit to conventional rates can blur the distinction in practice — scholars differ.
Why do musharaka payments fall in this calculator?
Because this is the textbook equal-unit model: you buy a fixed unit each period, and rent is charged only on the financier's shrinking share. Bank practice often holds the total level instead, with a rising buyout share.
Does this page certify a product as halal?
No. It explains the structures and the maths. Certification depends on the provider's Shariah board and the actual contracts.
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Sources & verification: see links in the text above. Rates verified 2026-10-18. If a rate or law has changed since then, the law prevails over this calculator.