Islamic Mortgages

JenJam111

Hi,
a buyer in our chain has said that he will be taking out a Sharia purchase payment plan or ‘Islamic mortgage’ rather than a conventional high street mortgage (despite having an AIP from NatWest when he made the offer). Our agent thinks this will significantly slow things down and will potentially collapse the chain as  they often create problems with the surveys. He has advised us to look for another buyer. Does anyone have any experience of these products? How long does it take?

ta

princeofpounds

In many ways, there isn't much difference between an Islamic mortgage and a normal one. A lot of the process is setting up slightly tortuous and contrived legal structures to avoid borrowing with interest, and instead doing something that looks suspiciously like borrowing with interest. A theological version of the Emperor's New Clothes in my opinion; financial-consulting Imams have to put food on their table too.

Having said that, one of the principal differences is that the bank does take legal title of the property instead of the buyer - in some cases permanently, in other cases just for a few moments before immediate resale to the buyer. There's a bit more emphasis therefore on the bank considering the survey beyond just a valuation, and arguably a little more legal work (but honestly very little if the solicitor knows the process).

I can't say I'd ditch a buyer using one of these instruments - any time saved would probably be lost in remarketing - but I have little practical experience with them in the conveyancing process. It will be interesting to see what others think.

davidmcn

I don't have practical experience either, but it's rather different from somebody saying they're having difficulty getting a mortgage or that a sale in the chain has fallen through, just one of the 1001 things which might make things slightly slower. 

theartfullodger

Could be worse , might be the ecclesiastical building society....

JenJam111

theartfullodger said:

Could be worse , might be the ecclesiastical building society....

Thought you were joking then I googled it! Had no idea all these faiths had ways of making money out of their followers. Sorry, I mean helping their flock get on the property market. #naiveatheist

JenJam111

davidmcn said:

I don't have practical experience either, but it's rather different from somebody saying they're having difficulty getting a mortgage or that a sale in the chain has fallen through, just one of the 1001 things which might make things slightly slower. 

Yes you are right, to be honest I feel for the buyer as we’ve said to him that the house will stay on the market whilst he sorts out his finances: he really likes the house so has accepted that and knows that it’ll be the same for most properties he tries to buy. 

eddddy

JenJam111 said:

...(despite having an AIP from NatWest when he made the offer). 

If I was a cynical person, I might wonder if the buyer 'played' the EA.

For example, the buyer got an AIP via the EA's mortgage broker - so the EA was expecting a nice bonus/referral fee. So the EA 'recommended' their offer to you.

Having got their offer accepted, they've now told the EA they're getting their mortgage elsewhere.

So the EA is annoyed that they won't get their bonus, so the EA wants you to find another buyer who will use their mortgage broker, and therefore get them a bonus.

allygate

JenJam111 said:

Hi,
a buyer in our chain has said that he will be taking out a Sharia purchase payment plan or ‘Islamic mortgage’ rather than a conventional high street mortgage (despite having an AIP from NatWest when he made the offer). Our agent thinks this will significantly slow things down and will potentially collapse the chain as  they often create problems with the surveys. He has advised us to look for another buyer. Does anyone have any experience of these products? How long does it take?
ta

I used to work for a second charge lender and I can tell you that there are plenty of residential and BTL properties bought and sold using Sharia mortgages, especially in and around cities like London, Manchester, Brum, etc. Just based on that I doubt they are significantly different at your end (as a seller) or any more likely to slow down the process.

You could do further due dil on the buyer's finances (proof/size of deposit, etc). Or you could just say that the house will stay on the market until he can show you a mortgage offer. I myself wouldn't do that as a seller or accept that as a buyer, but you can specify anything you want.

JenJam111

allygate said:

JenJam111 said:

Hi,
a buyer in our chain has said that he will be taking out a Sharia purchase payment plan or ‘Islamic mortgage’ rather than a conventional high street mortgage (despite having an AIP from NatWest when he made the offer). Our agent thinks this will significantly slow things down and will potentially collapse the chain as  they often create problems with the surveys. He has advised us to look for another buyer. Does anyone have any experience of these products? How long does it take?
ta

I used to work for a second charge lender and I can tell you that there are plenty of residential and BTL properties bought and sold using Sharia mortgages, especially in and around cities like London, Manchester, Brum, etc. Just based on that I doubt they are significantly different at your end (as a seller) or any more likely to slow down the process. 

Thanks for that, that is reassuring. I’ve never come across this before so have been a bit thrown by it.

whirlyhead

I work for a company that has sold to people with shariah mortgages recently and it did slow the sales down by a few months.  One ended up taking a year to go through but that was because they changed to a Shariah mortgage halfway through.

JenJam111

Thanks oneoption, that’s reassuring. The purchaser switched from a large nationwide conveyancer to a local one recently so I’m hoping that is a good sign (we live in an area with a large Muslim population). We’re also using a local conveyancer so hopefully that’ll help!