How to Refinance from Conventional to Islamic Mortgage

If you currently have a conventional mortgage and want to switch to Sharia-compliant finance, you're not alone. Many Australian Muslims refinance to align their home financing with their faith. Here's a practical walkthrough of the process.

Can You Refinance to Islamic Finance?

Yes — you can refinance from a conventional mortgage to an Islamic finance product at any time. The process involves exiting your existing loan and entering a new Islamic finance arrangement (Mortgagefy).

Major providers like MCCA explicitly state they can refinance your mortgage from any bank (MCCA FAQ).

Step-by-Step: The Refinance Process

Step 1: Assess Your Current Position

Check your current loan balance and remaining term
Review your current interest rate and monthly payments
Determine if you're on a fixed or variable rate (affects break costs)
Check your property's current value (use recent comparable sales)
Calculate your equity (property value minus outstanding loan balance)

Step 2: Get Quotes from Islamic Finance Providers

Contact at least 2–3 providers for quotes. Key providers:

MCCA — Ijarah Muntahia Bittamleek, no early exit penalties, $3.6B originated
Amanah Islamic Finance — Multiple structures, $500M+ financed, variable & fixed rates
Hejaz Financial Services — Musharakah structure, multiple product tiers
Ijarah Finance — Ijara, Diminishing Musharaka, and Murabaha options

Step 3: Understand the Costs

Cost	What to Expect
Break costs (existing loan)	If on a fixed rate, you may owe break fees. Variable rate loans typically have lower exit costs.
Discharge fees	Your current lender charges a fee to release the mortgage ($300–$500 typically)
New finance setup	Application fee, valuation fee, and potentially finance processing fee
Legal fees	Conveyancing/solicitor for title transfer and new documentation
Stamp duty	Some states previously charged double stamp duty on Islamic refinance — check your state's current rules (see our stamp duty guide)
Government registration	Mortgage registration/discharge fees (state-based)

Step 4: Apply and Get Approved

The application process mirrors a standard refinance. You'll need:

Current loan statements
Proof of income (payslips or tax returns)
Identification
Property details
Existing mortgage documentation

MCCA's processing timeline is approximately 3 business days per stage (application, LMI, valuation, funder processing, documentation), with settlement around 10 business days after all documentation is complete (MCCA FAQ).

Step 5: Settlement

At settlement, your new Islamic finance provider pays out your conventional lender, the old mortgage is discharged, and the new finance arrangement is registered on title. From this point, your payments go to your new provider under the Islamic structure (Ijarah, Musharakah, or Murabaha).

The Rate Reality

Islamic finance in Australia typically costs 0.3–0.8% more per annum than conventional mortgages (Mortgagefy). Before refinancing, calculate:

The total additional cost over your remaining loan term at the higher rate
The one-time refinance costs (break fees, legal, setup)
Whether the religious and ethical alignment justifies the premium for you

No early exit penalties with MCCA: MCCA explicitly states "no early exit penalties will be applicable" — meaning once you've refinanced to MCCA, you can exit or make extra payments without penalty (MCCA FAQ). This provides flexibility that conventional fixed-rate loans often don't offer.

Regulatory Protection

All Islamic finance providers in Australia must comply with the National Consumer Credit Protection Act and hold an Australian Credit Licence. They're subject to responsible lending obligations and must be members of AFCA for dispute resolution (ASIC Moneysmart). Verify any provider through ASIC Connect registers.

Sources

• MCCA FAQ — mcca.com.au/finance-products
• Amanah Home Finance — amanah.com.au
• Mortgagefy — mortgagefy.com.au
• ASIC Moneysmart — moneysmart.gov.au
• ASIC Registers — asic.gov.au