Alternative to Islamic mortgage?

rosie383

At present we have an interest-based tracker mortgage on a 2 bed house and,for religious reasons, we want rid of it.
We also need to move to a 3 bed house at the same time.
Any housing associations seem to be providing housing for key workers, first-time buyers, council tenants etc, so we don't fit their criteria.

Apart from going with an Islamic mortgage which is going to be much more expensive, do we have any other option?
We would probably have at least 60% deposit from the equity in our home.

Are there any other shared ownership schemes or similar that we could try who don't require us to be first-time buyers?

Thrugelmir

rosie383 wrote: »

Apart from going with an Islamic mortgage which is going to be much more expensive, do we have any other option?

Have you looked around. As there are competitive rates available through lenders such as Ahli United Bank.

rosie383

Ahli are only dealing with existing customers or new customers wishing to borrow a minimum of £550k.

holly_hobby

The fundamental element of an Islamic (Sharia compliant) mortgage, is that there is to be no benefit of interest. There are further variants as to which particular model the finance is effected under, which are Ijara, Musharaka, or Murabaha - Shaira compliant mortgages being shorthanded as HPP (home purchase plans).

Instead of traditional charging of interest, the lender will instead levy a rental or lease charge or add profit to the amount you repay in lieu of interest (a sort of front loading of interest if you like).

So there isn't really a variant you can source, its either Sharia compliant or its not - the choice is whether you go this route or source a traditional mortgage arrangement instead.

When I was involved in placing mortgage business, before moving into FS audit & regulation, the only contender in the UK market was the investment arm of the United Bank of Kuwait - who had a max ltv of 80% below 100k and 83% upto 250k, with lending mulitples of 2.5 of the first & 1 of the 2nd salary OR 2 x joint income.

Since then, other providers have entered the market such as HSBC whom faciliate lending through their Islamic finance arm called HSBC Amanah. The Arab Banking Corporation, whose range is called Alburaq (avail via Lloyds). The Ahli United Bank has already been raised and dismissed, with a further 2 providers as the United National Bank, and also Islamic Bank of Britan (IBB) - whom offer HPP finance.

The above lenders may not still be active in this market, but they offer some further avenues for you to investigate.

This is a specialist product, and in the main, general mortgage advisers won't be familiar with the format or the particular requirements of the individual to remain within Sharia - so I would strongly suggest sourcing a Sharia compliant/familiar mortgage broker to guide and assist you.

Hope this helps in the search ...

Holly

rosie383

Thanks Holly. I wasn't really looking for a 'mortgage' alternative IYKWIM. I know to be Shariah compliant it has to be as you describe.
I was just wondering if there is anything in the shared ownership route that may be suitable. Everything I have looked at so far- we wouldn't fit the criteria as we are not technically 'in need'.

holly_hobby

Due to the complexities of the mortgage itself I would doubt it .. but I'm guessing.

An active Shariah Mge Broker will be able to give you a definitive yes or no.


Hope this helps ..

Holly

CapJ

Shared ownership would indeed appear to be a good route for you as it does not involve a payment of interest, only rent.

The housing associations are clearly prioritising those who need it, however you can buy shared ownership on the open market. Search right move for shared ownership only - sometimes individuals are looking to sell.

Eg

http://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION%5E87490&maxPrice=150000&partBuyPartRent=true

holly_hobby

Shared ownership involves part buy and part rental of the property, or buying someones existing share on the open market - but the buying part obviously involves a mortgage if not purchased with existing capital - so your back to a suitable Islamic mge provider.

The only variant upon this is an Equity loan - which are not widely available, with fees suspended for the first 5 yrs (but if you dont have capital to pch your share, your back to needing a mortgage) :-http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/HomeBuyingSchemes/DG_171504

Here is a further link regarding Homebuy arrangements - you'll see though that capital or mge finance is reqd for the relevant equity purchase:-http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/HomeBuyingSchemes/DG_073696.

Hope this helps

Holly

CapJ

holly_hobby wrote: »

Shared ownership involves part buy and part rental of the property, or buying someones existing share on the open market - but the buying part obviously involves a mortgage if not purchased with existing capital - so your back to a suitable Islamic mge provider.

Eh? You are confusing things unnecesarily. The OP made clear they have sufficient capital.

rosie383 wrote: »

We would probably have at least 60% deposit from the equity in our home.

60% ownership share would work out fine (though depends on what is on the market). Also the OP could staircase up later eventually leading to 100% ownership share. No need for mortgage.

holly_hobby

Apologies .... my reading of your post, was that the comment ..

CapJ wrote: »

Shared ownership would indeed appear to be a good route for you as it does not involve a payment of interest, only rent.

was a general statement about Shared Ownership (which is obv incorrect if finance is reqd to pch the individuals share) - instead of being apparently based on the OP purchsing their entire share with personal capital, which your further post has stated.

Indeed, if the OP is to put down capital in order to pch their entire initial share - then I wholly agree, its certainly a good intrim solution to full ownership - and evades the constraints the OP is attempting to work within.

Hope this helps

Holly

besti

So, let me get this right! A sharia mortgage does not charge interest, the bank just adds a profit to the money you owe them. That's brilliant, just call interest another name and you have a sharia mortgage. I am goign to sell cider in Saudi and just call it it fizzy apple juice that make you feel a little funny.