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the one whose name is on the freehold title at the Land Registry. As you can see, Al Rayan has effectively hedged the risk in respect of all but one risk (Risk 3). Find MFM Islamic Mortgage Co in Bradford, BD1. Check out, Another key part of the process is the survey for the house. We have measured that by looking at the cost over the first 12 months (including product fee) which would be around £11,100 for AR and £10,980 with, (if buying a freehold). Instead I would prefer to buy via cash savings somewhere in Manchester (Bolton.Rochadle etc) where you can buy a three bedroom house for between 60k-80k. Final remark is that according to Quran and Sunnah, the default in financial transactions is permissibility, only when you introduce the forbidden it becomes haram. House damaged or made defective by an uninsured risk, This liability has been excluded pursuant to clause 9.2(a) of the DCA, Cessation of rent payments if a house gets destroyed/uninhabitable, This liability has not been excluded. Great analysis – a slightly tangential question to this. But, good intentions should compel anyone to rectify errors and fix unintended mistakes. Secondly, as mentioned, Islamic banks have now reached an agreement with the Bank of England to be able to get access to sharia-compliant liquidity. Good for: East Coast residents looking for low-down-payment mortgages, to work with state housing agencies or to get loans for building or remodeling a home. speak on your behalf. but has this been validated in terms of profit margins AR making. 13 months doesn’t sound good at all. Last week’s Ontario Superior Court judgment exonerating two men for a dozen criminal charges related to the marketing of Islamic mortgages based on Shariah law… If you’re not familiar with shared ownership then it’s basically a model whereby you own a certain amount (e.g. Our conclusion is that, given the current UK context, the HPP is the best Islamic mortgage option out there for those who qualify under the Al Rayan eligibility criteria. In a nutshell, the £100,000 costs more to Gatehouse so they need to charge more. So how does this all work practically? It is fine that the bank has sought to insure away this liability the best it can – but then the little bit it hypothetically hasn’t been able to insure away, it shouldn’t just transfer that back to the buyer. © Copyright Islamic Finance Guru. Hundreds of discussions we’ve had with professionals, Gatehouse staff and scholars over the last few years. It only covers the acquisition cost of the bank, i.e. The biggest reason is that Al Rayan is taking an equity risk as opposed to a lending risk and so the price is commensurate to that. (7.4) Reselling your house – bizarrely, you need Al Rayan’s permission to sell directly (unless to family), but you can sell without their permission through an estate agent (though ultimately they will need to be paid off in this case anyway). We make sure that all our information is up to date, provided in an easy to understand language; whilst at the same time making the whole decision making process as simple and easy to manage as possible. The Gatehouse HPP uses a combination of freehold and leasehold to deliver a diminishing musharakah/ijarah model (N.B. You need to agree with the terms to proceed. 3.7. islamicmortgage uk.co.uk. Ouch! We did find some disgruntled people in our own research too (but we did also find some very happy customers). Mohsin is the co-founder of IFG and a member of the Forbes 30 under 30. Thereafter reverts to standard variable which is 3.99% + base rate - i.e. Interest rates from 4.3%. (2.2) – under the service agreement the buyer can get paid £1 on written demand and in all cases prior to the signing of the agreement. One area we think they could improve on is their flexibility when it comes to the requirements. But he does have enough for a 25% deposit. A Homebuyer report incorporates a valuation, but also gives you much more detail. Mohsin is the co-founder of IFG and a member of the Forbes 30 under 30. Would I be legally responsible to pay off the entire debt from my will etc? We do not think that Al Rayan needs to be exposed to all of these risks. It is against Islamic law to receive or pay interest, which has traditionally been a big problem for Muslims living in the UK, as it meant that only the very wealthy were able to buy homes because they had the ability to purchase properties outright. Rayan could do a much better job on the customer service side. Islamic mortgages are designed to achieve the same economic results while complying with Shariah. If you are interested in applying for a loan today, get in touch with us. Accordingly, it should bear Risk 2. I understand that Mohsin opted for Heylo Housing (but plans to shift to Gatehouse or Al Rayan in the coming years) so your review would be really appreciated! We have heard of examples where schemes do let Muslims tweak the terms a bit so they can buy a house though. Islamic Mortgage Foundations and practices of a no-riba home mortgage. However these schemes are either (a) just starting out and not well-funded or widespread enough to be a genuine solution for the vast majority of Muslims right now; or (b) more expensive than Gatehouse and conventional providers (Heylo Housing, Primary Finance and other shared equity schemes) and so hard to seriously scale up. Simply put, a legal owner of a property is the “formal” owner of the property, i.e. Al Rayan is on the hook for this, Insurance money not being enough to cover damages and/or exceed the maximum finance-to-value ratio, The bank has got the right to not rebuild the property but to simply sell the property further to clause 6.1 of the DCA, The bank has got an indemnity from the buyer in clause 7 of the Service Agreement which means the buyer pays, Bank has to get work done to the property and damage is caused by its employees or agents to the property in the process, The bank has excluded this liability in clause 12 of the Lease Agreement, Al Rayan simply won’t sell at below market value – or to the extent you would like to, then you need to pay off the remaining amounts due with Al Rayan receiving the acquisition payment they made initially, We are strongly of the view that this is not acceptable, though we understand some scholars allow this option, ✔️ (though we have not yet reviewed in detail). This is because these schemes genuinely let you choose to not buy back your home and simply rent for periods. Let’s carry on using the same example of a 30-year mortgage term on a £250,000 house but change it to a 20% deposit (i.e. I notice that Mufti Taqi Usmani has given his approval to the Al-Rayan home purchase plan. Alternatively, you may at the outset want to ask the solicitor if you can nominate another person who is authorised speak on your behalf. A genuine solution for British Muslims needs to have scale and liquidity sufficient to meet the demand for Islamic mortgages and at the same time be affordable. This means that mainstream mortgages are not appropriate for Muslims, who have previously struggled to find ways to get a foot on the property ladder. Let’s take a look at another negative review: This complaint raises a few issues: 1) solicitor issues (remember what I said earlier about solicitor problems?) This flushes out any potential issues that you might not have known about or spotted when you looked around yourself (e.g. the process is different and this is how an Islamic mortgage becomes Islamic. Q: Now thinking overall, what rating would you give Gatehouse? Whether you’re a young muslim couple or an old muslim couple it doesn’t matter, islamic mortgages will cost more and that is unfortunate for practicing muslims. In simple terms, conventional mortgage is an interest bearing debt with the house securing the loan, no doubt this is haram. Housing and other shared-equity schemes offer. a close read of Al Rayan’s legal documentation; a wide-ranging survey of Al Rayan customers; and. The other factor tipping the balance in favour of Al Rayan here is that Heylo increase their rent every year by 0.75% + RPI (I.e. We asked our survey respondents to explain one thing that they would advise Al Rayan to change. Buying a house is a bit like having a side job – you will definitely have to take time out of your day to stay on top of things. I’d give them a 4* rating. shows that Al Rayan do have the ability to deliver great customer service. In my opinion it is identical to mortgage repayment + interest. “Hang on, what’s all this beneficial v legal gobbledygook?” you might be saying. They then need to “lend” out at more than 2% to make a profit. We have measured that by looking at the cost over the first 12 months (including product fee) which would be around £11,100 for AR and £10,980 with Heylo (if buying a freehold). I think that’s a very fair point. HPP are different, the bank has an equity stake in the house (essentially the bank is your partner), you pay the bank rent for its share and if you want, you pay some more to buy the bank’s share over time (difference between rent only and rent & acquisition). However these schemes are either (a) just starting out and not well-funded or widespread enough to be a genuine solution for the vast majority of Muslims right now (Primary Finance); or (b) more expensive than Al Rayan and conventional providers (Heylo Housing, Primary Finance and other shared equity schemes) and so hard to seriously scale up. Time passes, the Buyer continues paying rent and buying further equity in the house until eventually he owns 100%. The Islamic mortgage. Let’s take a closer look at some of the key risks at play here. This is another glowing review demonstrating the bank’s ability to manage the process, One area we think they could improve on is their flexibility when it comes to the requirements. More expensive than Gatehouse but generally quite user-friendly as far as we can tell, Some of them – though some aren’t, and some need a bit of negotiation and restructuring to get there, depending on how lenient the scheme provider is to this sort of thing, These are great when sharia-compliant, but often tend to have haram components built in. If that is higher than conventional banks then AR is taking advantage of its monopolistic position? for settling your finance early which is always welcome. You need to put yourself in their position as they have to pay the ground rent, service charge, council tax and the annual letting management fee in addition to the mortgage and their annual income is not that great. If you wish to deal with these companies then please contact them to verify their mortgage systems for Shariah compliance as we cannot guarantee it 100%. I just hope that the whole process goes smoothly for the remaining 20 or so years. This is a good thing and a genuine difference between Al Rayan and a conventional lender who would continue charging interest. Get contact details, videos, photos, opening times and map directions. A close read of Gatehouse’s legal documentation; A wide-ranging survey of Gatehouse customers; and. Listed below are some companies offering Islamic mortgages. This is because these schemes genuinely let you choose to not buy back your home and simply rent for periods. There’s a balance here, as nobody wants Al Rayan to face regulatory pressure or be known as the Islamic bank that went wrong. As salamu alaikum, My brother in law has been doing some research on AL Ryan bank but i think customer service bit has put him off taking home purchase plan of AL Ryan Bank. From the sharia side, of course there are improvements that can be made. But it’s good to hear it went smoother the next time round and they sorted a discount out for you. We hope that, as more people come to Al Rayan through IFG, we can together influence the overall Islamic mortgage market for the better inshAllah. That’s not really a bad thing – you don’t really want Gatehouse to actually be your landlord. He is also a fan of the customer service. So a mainstream bank borrows £100,000 off the Bank of England at the base rate of 0.75% and then lends that £100,000 out to Bob at 2% and takes the difference. For religious reasons, many British Muslims would prefer to avoid having a conventional mortgage. The HPP is not a perfect model and an arguably more Islamic model is something like what Heylo Housing and other shared-equity schemes offer. would work out slightly cheaper (even factoring in the much higher product fee). that mainstream mortgages are haram, then you’re comparing apples and oranges because you shouldn’t be going for the haram product anyway. It would be nice if Al Rayan had some flexibility on this as I know that these reports can be obtained much cheaper. The structure is identical in legal form to the Al Rayan HPP. Asalamualaikum. Ultimately we conclude that, given where we are right now in the Islamic finance industry’s development and the size of the Muslim population, Gatehouse’s model is acceptable. Does his authentication still apply to the current HPP although he has retired from the Shariah board? I just wished more in depth explanation of the “rate” and “interest” parts of the islamic mortgage was provided for the average non-finance-fluent UK practicing muslim, as myself and many others, who are literally, for lack of a better term, turned off by the mere use of these terms in any islamic products be it house, car, phone, etc. Housing, Primary Finance and other shared equity schemes) and so hard to seriously scale up. The key here is to stay on top of your solicitors and chase them regularly. They have to get their money from savings accounts and, offerings, and this is more expensive because people with savings account or holding. Islamic mortgage alternatives vs standard mortgages. As you can see, Al Rayan has effectively hedged the risk in respect of all but one risk (Risk 3). But that’s genuinely a big “if”. Incidentally, this is one area where Gatehouse has an advantage over Heylo. Islamic mortgages, or house purchase plans (HPPs) can involve ijara, where you are technically leasing the property from the bank, or diminishing Musharaka, where you buy in … Let’s look at the first negative Trustpilot review: With the caveat that we don’t know the ins and outs of the case, this is a pretty damning review. However, we are very much keen to see progression and Al Rayan and others evolving their models as the Muslim community grows and as the gains in infrastructure, tech and regulation allows banks a bit more breathing space. Doing a similar search for an equivalent rental property tells you that you can expect to pay something like £750-£900. Learn more about this and other mortgage lenders at Bankrate.com. A sad reality is that some property deals will fall through (30% of them according to some stats). Note that cost of these figures is taken from Al Rayan as you have to go with their valuer. Required fields are marked *. For instance, Heylo Housing allow you instruct any RICS-certified surveyor. We have anecdotally heard that Al Rayan’s checks can be quite cumbersome at times. Find helpful customer reviews and review ratings for Pious Property: Islamic Mortgages in the United States at Amazon.com. If these products are deemed permissible (according to some scholars) to take out, would the converse hold true as well, i.e. In a UK or US context, domestic law can be used for Islamic finance without importing Shariah into the legal system. LTV stands for “loan-to value”, is simply a figure to express what percentage the loan is in comparison to the property being bought). This means that mainstream mortgages are not appropriate for Muslims, who have previously struggled to find ways to get a foot on the property ladder. How does that choice compare with taking out a mortgage? Alternatively, you may at the outset want to ask the solicitor if you can nominate another person who is. All banks require. But it’s worth bearing this in mind when it comes to planning your timeline. There are different types of Islamic mortgage products. Note: these figures are accurate as at June 2020, during the coronavirus pandemic when many lenders are reluctant to lend. Clarity around the justification for their higher prices [IFG note: we have explained this in this article]. So we have first-hand experience of the Gatehouse product. the best Islamic mortgage product available right now. Whilst mainstream banks can take loans from the bank of England at low interest rates, sharia compliant banks cannot. Thanks for this well-researched and well-written article. (12) – Al Rayan have excluded liability for any damage caused by them (or someone they’ve appointed) to the property. Again, very much appreciate your efforts in IFG and remain a big supporter of the work being done. It’s usually another 3-5 weeks from the offer of finance to legal completion as long as all the right documents are submitted to the solicitors and satisfactory legal reports are received.”. This Islamic finance model goes thus: the buyer of the property slowly buys more and more of the house over time, and his rental payment on the amount he does not own slowly decreases at the same proportion. Share Flipboard Email Print CEphoto, Uwe Aranas/Wikimedia Commons/Photo by CEphoto, Uwe Aranas / CC-BY-SA-3.0 Islam. This is jointly held by Al Rayan bank and the Buyer and notes the existence of a charge in favour of Al Rayan in the Charges Register associated with this leasehold title. That is sadly the price we pay for participating in what is a small and relatively new market. This should in theory reduce the cost of capital to the bank, and therefore lead to a reduced rate being charged to customers. We really want the main players to come back with sharia-compliant products. Find helpful customer reviews and review ratings for Pious Property: Islamic Mortgages in the United States at Amazon.com. For instance, Heylo Housing allow you instruct any RICS-certified surveyor.

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