Certificate In Mortgage Advice And Practice (CeMAP) 2 Practice Exam

Which statement about the Murabaha method is correct?

The borrower pays no profit and no markup. The property is leased to the applicant with rent payments. The property is purchased by the lender and sold to the applicant at a higher price. The property is purchased by the borrower at a discount.

Correct Answer:

The property is purchased by the lender and sold to the applicant at a higher price.

Explanation:

Murabaha is an asset-based sale where the lender buys the property and then sells it to the borrower at an agreed, disclosed markup. The profit margin is fixed upfront, and the repayment terms are agreed at the outset, often with deferred payments. This structure distinguishes Murabaha from leasing (where the asset is rented) and from charging interest on a loan. So the statement that the property is purchased by the lender and sold to the applicant at a higher price best reflects how Murabaha works, aligning with the requirement of a cost-plus, disclosed profit in the sale.

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