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The short answer
A non-interest mortgage replaces interest with a sale, lease or partnership: the bank buys the home or a share of it, and you pay rent on its share while buying that share out over time (Diminishing Musharaka) or lease it until ownership passes to you (Ijara). You still pay more than the house price in total, because rent or an agreed profit margin takes the place of interest. NMRC runs separate underwriting standards for non-interest lending, and you should get the full payment schedule in writing before you sign.
Non-interest home finance is offered in Nigeria by banks and windows licensed for non-interest banking. It suits people who will not pay interest for religious reasons, and some who simply prefer a fixed, rent-like structure. The cost can be similar to a conventional mortgage; what differs is the legal shape of the deal. This guide explains the common structures, how the cost builds up, and the questions to ask. It is information, not religious, legal or financial advice.
For which institutions hold a non-interest licence, see non-interest banks in Nigeria.
The main structures
- Ijara (lease to own)
- The bank buys the property and leases it to you. You pay rent for an agreed period; at the end, ownership passes to you by sale or gift as the contract sets out.
- Diminishing Musharaka (declining partnership)
- You and the bank buy the property together. You pay rent on the bank's share and, alongside it, buy the bank's share in instalments. As your share grows, the rent falls, until you own the whole property.
- Murabaha (cost-plus sale)
- The bank buys the property and sells it to you at an agreed higher price, paid in instalments. The mark-up is fixed at the start.
Diminishing Musharaka is often combined with an Ijara lease on the bank's share, so the two names frequently appear together on one offer.
How the cost builds up
With no interest, the bank earns through rent (Ijara and Musharaka) or a fixed mark-up (Murabaha). You will also usually meet the costs any home buyer faces: an equity contribution, legal and valuation fees, insurance, and the Governor's consent to register the bank's interest in a statutory right of occupancy, which the Land Use Act requires before land held under a statutory right is mortgaged or transferred.
Worked example: Diminishing Musharaka (example only)
All figures here are invented to show the mechanics; they are not any bank's terms. A house costs ₦20,000,000. You put in ₦4,000,000 (20%) and the bank puts in ₦16,000,000 (80%), split into 16 units of ₦1,000,000. You agree to buy one unit a year and to pay rent on the bank's share, with the full-house rent set at ₦1,200,000 a year and not reviewed.
| Year | Bank's share at start | Rent you pay | Unit purchase | Total that year |
|---|---|---|---|---|
| 1 | 80% | ₦960,000 | ₦1,000,000 | ₦1,960,000 |
| 2 | 75% | ₦900,000 | ₦1,000,000 | ₦1,900,000 |
| 3 | 70% | ₦840,000 | ₦1,000,000 | ₦1,840,000 |
| 16 | 5% | ₦60,000 | ₦1,000,000 | ₦1,060,000 |
The bank's share falls by 5 percentage points a year, from 80% to 5% across the 16 years. Adding those shares gives 680% of one year's rent, so total rent is 6.8 × ₦1,200,000 = ₦8,160,000. With the ₦16,000,000 of units, you pay the bank ₦24,160,000 over 16 years, on top of your ₦4,000,000 deposit. In real contracts the rent is often reviewed, for example yearly, which changes these totals, so ask how and when it can change.
Non-interest and conventional, side by side
| Point | Conventional mortgage | Non-interest home finance |
|---|---|---|
| Bank's return | Interest on the loan balance | Rent on its share, or a fixed mark-up |
| Who owns the house during the term | You, with the lender holding a mortgage | Often the bank, or you and the bank jointly |
| What changes the cost | Rate changes on a variable loan | Rent reviews written into the contract |
| Late payment | Default interest or fees | Contract terms vary; ask how late charges are treated |
| Insurance | Usually conventional cover assigned to the lender | Often Takaful, if the bank requires it |
The practical lesson is to compare like with like: the total you will pay over the full term, the deposit, and what can change after you sign. A lower monthly figure in year one can hide rent reviews later.
Who offers it and how underwriting works
The Nigeria Mortgage Refinance Company says its Uniform Underwriting Standards include a set for non-interest banking, developed with the CBN, the Mortgage Banking Association of Nigeria, FMBN and the NDIC. A lender that follows them can refinance qualifying non-interest home finance through NMRC, which helps it offer longer terms. Ask any lender whether your deal is written to that standard; how NMRC refinancing works explains why it matters.
On the Federal Mortgage Bank of Nigeria: its conventional National Housing Fund mortgage is an interest-bearing product, which FMBN described in 2018 as carrying a fixed 6% rate. We could not confirm from an FMBN page opened in October 2026 whether a non-interest NHF window is open to applicants, or on what terms. Ask FMBN or your primary mortgage bank directly, and get the answer in writing.
What to check first
- Which structure is used, and whether you own a share of the property from day one.
- The full schedule: rent, unit purchases or instalments, for every year.
- Whether and how the rent can be reviewed, and any cap on reviews.
- Who pays for insurance (often Takaful), maintenance and major repairs while the bank owns a share.
- What happens if you miss payments, and whether late charges go to charity rather than to the bank.
- The cost and process of buying out the bank's share early.
- Title: the property must carry a title the lender accepts; see title documents mortgage lenders accept.
Where Pryme fits
Pryme does not provide home finance. Its Interest-free Box is a Naira savings Box that earns nothing by design, which some savers use to build a deposit without earning interest. You can also keep your deposit in other Savings Boxes and share a verifiable statement with a lender (verifiable statements).
Questions people ask
Is there Islamic mortgage in Nigeria?
Yes. Non-interest banks and windows offer home finance using Ijara, Diminishing Musharaka or Murabaha structures. Ask each lender which it uses and for the full payment schedule.
How does Diminishing Musharaka work for a house?
You and the bank co-own the house. You pay rent on the bank's share and buy that share out in instalments; the rent falls as your share rises until you own it all.
Is a non-interest mortgage cheaper than a normal mortgage?
Not necessarily. Rent or a profit margin replaces interest, and total cost can be similar. Compare total amounts paid over the full term.
Does FMBN have a non-interest NHF loan?
We could not confirm a current FMBN non-interest product from FMBN's own pages in October 2026. Ask FMBN or your primary mortgage bank directly.
Sources
- NMRC: Standardization (Uniform Underwriting Standards) · accessed Oct 2026
- Land Use Act, Cap L5 LFN 2004 (PLAC Laws of Nigeria) · accessed Oct 2026
- FMBN presentation at the BPSR Lunch Time Reforms Seminar (Federal Mortgage Bank of Nigeria, 6 Sep 2018) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.