Median answer: 8.5/10. All the other documents in the list below point to this document and are themselves quite short documents. We think it could improve though too! For example, if RPI is 2.5%, then your rent would increase by 3.25% next year. Islamic financing companies with solutions that involve mortgage paperwork, or other loan based solutions now have a way to make it right. Read honest and unbiased product reviews from our users. From our personal perspectives, Ibrahim currently has a Gatehouse mortgage and has previously had an Al Rayan mortgage, while Mohsin opted for Heylo Housing (but plans to shift to Gatehouse or Al Rayan in the coming years). That’s a very good score indeed. They are also restricted to set properties – often new-builds though (which are often slightly overpriced), This is a young start-up and will only be able to finance a handful of home purchases unless it gets hold of some deep liquidity (we hope they do! Read thousands of customer reviews to find a lender for your home loan. Thereafter reverts to standard variable which is 3.99% + base rate - I.e. As Muslims we must make sure that what we are doing is according to the quran and sunnah not by the words of scholars alone, we need evidence from the book of Allah the sunnah of our beloved prophet Muhammad peace be upon him. The Diminishing Co-Ownership Agreement (the “DCA”). They are now smashing it. From this review and others that we have gone through, it is clear that Al Rayan could do a much better job on the customer service side. An Islamic mortgage allows you to buy a house in a sharia-compliant manner over a number of years without using any interest (riba). This should give a little more breathing room to the banks to be able to implement some of the risk allocation measures we recommend above, as well as passing the saving down to customers. All this costs money, and means that such a bank needs to be able to package up its Islamic mortgage product in such a way as to effectively minimize risk for itself as much as possible and mimic the debt-like characteristics of mainstream mortgage providers. This is a sensible concern. For instance, Heylo Housing allow you instruct any RICS-certified surveyor. When it does expire, the freehold owner will be able to step in and take possession of the property. Great job guys, very well researched article! Stage 4: Release of funds (roughly 3 days). Remember to check out the Islamic mortgage comparison page! mortgage market and see where Al Rayan fit in from a pricing perspective. (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. In short, we think being driven by price is the wrong approach to take. This is because these schemes genuinely let you choose to not buy back your home and simply rent for periods. But your rent does not pay down equity in the house. the delays might be there, things do usually get sorted. rising damp, dry rot timber etc). It is worth expanding on a few components of this timeline. 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. Having said all that, the actual legal documentation is very similar between the two banks, to the point that, amusingly, the clause references are very similar too. Assalamualaikum brother. Stage 3: Conveyancing (3-5 weeks) Ouch! This is the initial offer letter the bank sends confirming that it is in principle signed off on you, that you can go ahead and make an offer on a property and start the conveyancing process with a solicitor. The Al Rayan graphic says to account for 9 weeks for conveyancing but we think this is ambitious. There is also a co-ownership agreement which says that Al Rayan agrees to sell you its share of the property for the amount of the finance that it provides. They are also restricted to set properties – often new-builds though (which are often slightly overpriced), This is a young start-up and will only be able to finance a handful of home purchases unless it gets hold of some deep liquidity (we hope they do!). He is an Oxford graduate and ex-corporate lawyer with a specialism in private equity and venture capital. 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). Subject to admin fees, you do not get. The typical Al Rayan process will look like this (taken from this official Al Rayan, Solicitors are notorious for being slow and holding things up. Our direct experience was overall good. 3.7. islamicmortgage uk.co.uk. In this scenario and for this particular product, Gatehouse is coming out slightly cheaper. We have to be honest – they are a bit painful when you go through the initial background checks stage with them. For instance, if you need flexibility to move quickly because of your job it doesn’t make sense to buy. Secondly, there is a £25 administration fee for early repayments. The valuation report is simply a report to assess the valuation of your future home. Write a review. We have now entered the dawn of a new era in the West and we have available to us viable alternatives to conventional interest based mortgages. 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. But that’s genuinely a big “if”. We discuss this in the, section below. islamicmortgage uk.co.uk. that mainstream mortgages are haram, then you’re comparing apples and oranges because you shouldn’t be going for the haram product anyway. Given the vanishingly small risk of a property being damaged by a risk that is not insured, this is not a big ask. Incidentally, this is one area where Al Rayan has an advantage over Heylo. We are told that the HPP is substantively different from a conventional mortgage in a number of ways, primary among them the fact that the bank takes on a different set of risks to that taken on by a conventional provider. A Homebuyer report incorporates a valuation, but also gives you much more detail. Average answer: 7.6/10 Luckily for … Solicitors are notorious for being slow and holding things up. Its definitely more of a systemic issue than an intentional issue as explained in the later part of the article. Let’s take a closer look at some of the key risks at play here. salaam Steve – yes that’s right – we do think its halal. In these circumstances, it is useful to have home buyer protection insurance. he cost of financing is generally higher for Islamic banks (as they can’t borrow from the Bank of England, or the mainstream money markets at low interest rates). It’s not the best situation for muslims but as the article clearly mentions islamic mortgages will cost more than mainstream mortgages because of the fact that liquidity is sourced differently. , Gatehouse is coming out slightly cheaper. They have to get their money from savings accounts and sukuk offerings, and this is more expensive because people with savings account or holding sukuks want to get paid. The following banks and brokerage institutions offer Islamic, or no riba', home mortgages which are compliant with Islamic law.This is not a trivial business practice - the Prophet Muhammad is said to have cursed the consumer of interest, the one who pays it to others, the witnesses to such a contract, and … Here’s a few quibbles we had with this document: This is the agreement through which the bank charges the equivalent of “interest” under a conventional mortgage structure. By Faleel Jamaldeen . David was very easy to work with and all of the parts of the process that were in their control went very quickly (the appraisal report took a long time to come back, but that was because so many people were having appraisals done due to low rates). I Islamicmortgages.co.uk allows you to view a range of home finance product information, provided by all the lenders in the UK. However when they investigate the cost of Islamic mortgages, (for details of how they work, see A simple introduction to Islamic mortgages) they are often dismayed by how much more they cost than conventional mortgages.. Islamic mortgages have been in the mainstream market in the UK for some years but it can often be difficult to get to grips with sharia-compliant financial products, which can seem confusing. But he does have enough for a 25% deposit. Renting can make sense in some circumstances. what makes it halal). This should in theory reduce the cost of capital to the bank, and therefore lead to a reduced rate being charged to customers. Gatehouse 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 Diminishing Musharakah Agreement, 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 10 of the Lease Agreement, Gatehouse 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 Gatehoues 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. Slightly more concerning is the lack of customer service. It has a few more products, has a better capital base, and is able to be a bit more flexible from what we have seen. © Copyright Islamic Finance Guru. A leasehold interest is different from a freehold in that it is necessarily time-restricted. We believe the HPP could be better from both a commercial and Islamic perspective if a few tweaks were made to it. Let’s look at how AR stacks up against a well-known shared ownership provider, Heylo Housing. This flushes out any potential issues that you might not have known about or spotted when you looked around yourself (e.g. We will explore the commercial rationale behind going for shared ownership in a future article, but it can be useful if you cannot get an Islamic mortgage for whatever reason (or you don’t want to). There is no getting away from the fact that Al Rayan is expensive. The Bank Signed Offer also contains an important checklist at the back of things that will need to be completed/sorted-out before the bank can pay the money. In short, this has been a time-intensive exercise for us, but inshAllah it is the best resource out there for Muslims wanting to properly understand the Al Rayan mortgage both Islamically and commercially. Are Islamic mortgages cheaper? Search for mortgage lenders on the largest online directory of licensed lenders. They offer online access to the HPP account, but at one point due to an upgrade they locked me out of it for 3 months – 3 months. Someone who got his home purchase, completed on time and without any issue. It’s not the best situation for muslims but as the article clearly mentions islamic mortgages will cost more than mainstream mortgages because of the fact that liquidity is sourced differently. Nor do you have to buy any more equity in your house (though there is the option to do so which will, in turn, reduce your rental payments). August 19, 2019. inflation). Islamic Finance Guru Ibrahim Khan explains why conventional mortgages are almost certainly haraam in the vast majority of cases and why Islamic mortgages – despite their sometimes negative reputation – are our only real alternative.. Everyone loves having a pop at the Islamic mortgage, from the business-savvy uncle, the world-weary professional, to the ultra-religious brother down the masjid. You can sell the property at any time and if the value has gone up, you will benefit because you only have to settle the finance amount with Al Rayan. Mashallah, you are adding value to our vulnerable Muslim community. Accordingly it should bear Risk 2. That’s a fancy holiday or, true to our ethos, you could invest that money and grow it. They have always been courteous and relatively swift in their communications and overall things have gone smoothly. Mortgages that don’t break Islamic laws on paying interest. Assalamualikum. In our example, that means going from £815 a month to £841. The legislation has not really caught up with providers like Heylo. 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. 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. Actually, a really really sharia-compliant option will be more expensive than an Islamic bank because, as you said, the counterparty would be taking on proper equity risk in the asset and would want to be remunerated for that. Read honest and unbiased product reviews from our users. I don’t know the answer definitively, but would strongly assume that this is straightforwardly possible. Islamic Mortgage Explained. That makes many young Muslim families I know still prefer mainstream mortgage than Halal Mortgage. Alternatively, you may at the outset want to ask the solicitor if you can nominate another person who is authorised speak on your behalf. Ultimately, when all is said and done, this is a sharia-certified product that we are personally happy with too. Look For Islamic Mortgage Usa Free Online Mortgage Refinance Calculator Direct Mortgage Lenders Near Me Current Bank Mortgage Rates Canada Dhfl Home Loan Cibil Score Defective Mortgage Definition Dbs Home Loan Rates Singapore December 2019 Mortgage Rates Csmc Mortgage Reviews Deferred Down Payment Home Loan Current Prime Mortgage Rate . It can’t just be, cosmetic changes. Een gratis kijkje achter de schermen bij bedrijven: reviews en salarissen, anoniem geplaatst door werknemers. I’m in the process of refinancing to ARB and they do have very serious customer service issues in my experience but if you see past that then you are ultimately getting peace of mind by staying away from riba. You can use our Islamic mortgage comparison tool to easily compare all your options in greater detail. This all works from a legal perspective and the good thing here is that you are dealing with a relatively large, trusted organisation. To complicate matters further, an interest in a house can be a freehold or a leasehold. It requires weird workarounds to make sense in today's world. Not dissimilar to what you would pay with an Islamic mortgage, but you have the inflexibility that comes with renting. In the UK there are 3 types of Islamic mortgage products being offered: diminishing musharaka, aka the Home Purchase Plan (this is by far the most common) I appreciate that it’s not what many want to hear, but we need to be realistic and put things into perspective. The HPP is not a perfect model and an arguably more Islamic model is something like what Primary Fi. shows that Al Rayan do have the ability to deliver great customer service. So Al Rayan’s target audience is (relatively speaking) tiny, and accordingly its prices won’t benefit from the economies of scale that larger lenders benefit from and reflect in their pricing.