Murabaha Explained in 5 Easy Steps

Property Purchase
You identify the property for purchase which we purchase for you. At closing you assign the purchase contract to Devon Islamic, enabling us to purchase the home from the seller on the same terms and conditions you agreed to with the seller.
Second Transaction
This takes place immediately after the purchase, where Devon Islamic sells the house to you for a fixed price, paid overtime without interest.
Fixed Price
The key here is the fixed price which includes the price Devon Bank paid and its profit. Profit is determined by taking into consideration purchase price, amount of down payment, term of repayment & market rate of return on real estate transactions expected by our investors.
You provide us with the agreed down payment and the balance of the Murabaha debt will be paid in installments as agreed.
You will have the title/ownership to the property at closing.

Muhammad Example

Muhammad and his family would like to purchase a condo which costs $240,000. To do so, Muhammad would work with Devon Islamic to purchase the condo. Devon Islamic would purchase the condo for Muhammad from the seller for $240,0000 and sell it to Muhammad for $286,000 to be paid in monthly installments over a 15-year period. The scheduled monthly payment not including insurance and taxes would be $1,586.21. The $286,000 that Muhammad would pay for his condo would be a fixed amount to Devon Islamic which owns the home now. The extra amount Muhammad pays along with the cost of the condo listed by the seller is a 2.375%(APR)* profit rate which is not interest as it is offered as a fixed payment without any additional costs, hence making this transaction Shariah compliant. While late charges may be applicable but contract balance is not compounded.

*Rates are subject to change & financing subject to approval. Payments do not include amount for taxes and insurance premiums.

*APR = Annual Percentage Rate