Sharia'a Approved Home Purchase Plan
- Market competitive - available to all customers regardless of faith
- Rates start from 3.99%
- Up to 80% finance offered on property value which must be over £150,000
- Only £299 administration fee
- Refinance deals - Free valuation and customer solicitors costs paid up to £800*
- No penalty for lump sum payments and no early repayment charges
- Minimum finance of £70,000 - Maximum £750,000. Exceptions considered.
- Income from up to four people can be taken into account
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Approval Criteria
Before you complete this form, please ensure you can satisfy the following criteria
- You are aged 21 years or over, and under 65
- You are a resident of the UK or have indefinite leave to remain in the UK
- The property to be financed is in England or Wales
- The property will be your main residence
- You are in full time employment or self-employed with a minimum of 2 years accounts
- You have never been declared bankrupt or had a CCJ
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*Fee Assisted - If you decide to settle your Home Purchase Plan during the first 5 years you will be required to repay to the Bank the full cost of the solicitors and valuation fees incurred.
Subject to status. Terms and conditions apply.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
How the Home Purchase Plan works
When did Islamic Bank of Britain begin offering "the mortgage alternative"?
On 1st July 2008, Islamic Bank of Britain (IBB) announced it was to launch a Home Purchase Plan (HPP), referred to as ‘the mortgage alternative’, allowing homes to be purchased while remaining Sharia’a compliant.
Islamic Bank of Britain’s Home Purchase Plan follows the Islamic financing principles of Ijara (leasing) and Diminishing Musharaka (partnership). This plan allows the customer and the Bank to both contribute to purchasing the property and effectively become partners. The customer can then make monthly payments and eventually purchase the banks share. As each repayment is made, the banks share in the property is reduced and the customers is increased until the agreement is completed and the customer owns the property out-right.
Who has approved the new mortgage plan?
Islamic Bank of Britain’s Home Purchase Plan has been approved by the Bank's Sharia’a Supervisory Committee.
How does a Sharia’a compliant plan differ to a conventional mortgage?
The table below outlines the key differences between the two:
| Sharia’a Compliant Plan | Interest Mortgage |
|---|---|
| The customer is renting the property from the Bank and will pay rent on the occupied share of the property | The customer is paying interest on money borrowed as a loan received from the bank |
| Both the bank and the customer are responsible for maintaining the property | The customer is fully responsible for maintaining the property |
| The bank charges an income in the form of rent for using its share of the property | The bank charges an income in the form of interest on the loan borrowed by the customer |
| The partnership between the customer and the bank puts equal risk for both parties associated with ownership of the property | The bank carries no ownership risks |
| The bank will legally own the property but the customer will have the beneficial interest of the property and the leasehold | The customer is the legal owner of the property |
Below is an example of how the plan works:
Lets say you want a property that costs £150,000. You have £30,000 (20%) to pay towards the property. You want to spread the remaining cost over a 25 year period.
In this example, the Bank will pay £120,000 (80%) and you will pay your £30,000 (20%). All payments will be managed via the solicitors.
Based on this example, your monthly payment would be as follows:
| Date | Acquisition Payment | Rent | Total Monthly Payment |
|---|---|---|---|
| Jul | £333.33 | £615.85 | £949.18 |
| Aug | £335.26 | £613.92 | £949.18 |
| Sept | £337.19 | £611.99 | £949.18 |
| Oct | £339.12 | £610.06 | £949.18 |
| Nov | £341.05 | £608.13 | £949.18 |
| Dec | £342.98 | £606.20 | £949.18 |
These payments are split into two components:
Rent – This is the amount paid to the bank for it's share of the property. This is covered the ljara (lease) agreement.
Acquisition – This is the amount paid towards buying out the banks share in the property. This is covered by the Diminishing Musharaka (partnership) agreement.
As the banks share is reduced through payments, the rent reduces to reflect this.
The rent costs are fixed for the initial period of the Lease Agreement until either the end of March, or the end of September, whichever comes first after the date of completion. After this, the rent costs will be fixed for six month blocks and will be reviewed in March and September each year. At each Rent Review date the rent rate may increase, decrease or stay the same.
All rent payments are due in arrears and IBB will write to advise of any new payments in good time. The lease agreement sets out how the rent is calculated, how the rent may vary and also explains that you have the option to purchase the banks share (i.e. pay the remaining acquisition cost) at any time, subject to terms and conditions.
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