Sharia compliant mortgages have brought a fresh approach to the market in recent years. Getting a Sharia compliant mortgage means they comply fully with Sharia law and therefore allow you to purchase a property where it would not of been possible with a traditional mortgage.
"True Advice have been advising me for years with my mortgage. They make sure that everything is clearly understood and compliant with Sharia law which has really benefited me and my family."
"I always found it tough to get information on mortgages that would be compliant with my religion. There was nothing clear online so I got advice from Ashley which was superb. He made the process easy to understand and get completed."
A sharia compliant mortgage works in a slightly different way to a traditional mortgage. With your traditional mortgage the purchaser buys the property using funds put down as a deposit and the banks mortgage funds. They then pay interest on this amount and reduce the balance over the years. After the end of the mortgage term they will then own the property outright.
Sharia compliant mortgages work in a different way. To comply with Sharia law a debt can’t be incurred so the bank purchases the property on your behalf. Then you are charged rent each month to the bank plus a surplus on top that counts as you buying shares of the property off the bank. And over time you will have purchased all the shares off the bank and own the property outright. With the lenders they are called ‘home purchase plans’.
In the world of Islamic finance and home purchase plans there are two main types of mortgage that differ slightly. These are the Mubhara & Ijara mortgages. Let’s go into more detail on the Murabaha style below.
The main difference between the Murabaha and the Ijara is that with the Murabaha you own the property outright from the offset. The bank purchases it and sells it back to you immediately at a slightly higher price. You then agree to make monthly payments to the bank over a period of time. Normally the maximum for this is 15 years. The deposits for this normally start at about 20% as well. It’s a shorter term with a higher deposit and repayments but it is a cheaper solution if you have the capital.
You can also settle a Murabaha mortgage at any time without penalty. the Ijara model is slightly different and has proven to be more popular as it has a lower deposit requirement and you can spread the payments over a longer term. Let’s go into it in more depth below.
With an Ijara mortgage they work more in terms of a lease rather than a purchase buy back like the Murabaha. The process of getting them both done are very similar but there are key differences for us to note between both of them.
The bank will still purchase the property on your behalf with an Ijara mortgage. But they lease it back to you and you pay a mixture of rent and shares of the property that you purchase. Then over the years once you have purchased all the shares of the mortgage you own the property. Knowing the amount of shares that you need to purchase is dictated by the amount of years that you put on the mortgage term.
The amount of rent will also decrease annually as the mortgage itself will decrease. When the amount has been settled in full the lender will transfer the ownership of the property to yourself and you then own your property outright. Ijara mortgages have proven to be more popular as they have a lower need for deposit and can be stretched over more years than the Murabaha model.
We work exclusively with two sharia compliant lenders that lend throughout the United Kingdom. Sharia compliant lenders are not very common and we are privileged to have such close relationships with both of these. How we can help you is we act as an intermediary between yourself and the lender. Guiding you through the process of your purchase or remortgage. Making sure you get the best rate available and have a lending package that suits your needs.
Having someone to explain the mortgage process can be invaluable. We are by your side throughout the process and help you to understand it all as well as speeding along the process and communicating throughout. On top of this the two lenders that we use are currently providing the most competitive rates in the country.
The first step to our advice process is to have an informal chat about your needs, wants and current circumstances. Once we talk this over and decide what we could realistically do for you, we will go ahead and ask you to fill out a fact find for us. The fact find is fully encrypted in our online client portal meaning no one can steal your data.
We then use this financial information to research on your behalf. Once we have done our research we present our solution along with a client agreement that goes over our fees for the advice process. If you want to go ahead with this and with using us as advisors you sign the agreement and off we go.
We will then guide you through getting a decision in principle, full mortgage application through to mortgage offer. We can also recommend sharia compliant conveyancers to do the legal side of your sharia compliant mortgage. We will take care of you from day one through to you being in the property and we pride ourselves on that personal service. How do you start this process? Contact us now.
Equity Release plans are not right for everyone. And it is important that you fully consider your options and receive independent financial advice before making a decision. It is also important that, if you do decide to use an equity release product, you choose one that meets your needs.
Remember that taking an equity release plan is generally a long term option. However, there are flexible plans available that may fit your varying needs and some will allow you to repay in the future without penalties.
All investments involve a degree of risk of some kind. This section describes some of the risks which could be relevant to the services we provide you. We may provide further risk information during the course of our services to you, as appropriate.
Our services relate to certain investments whose prices are dependant on fluctuations in the financial markets outside our control. Investments and the income from them may go down as well as up and you may get back less than the amount you invested. Past performance is not a guide to future performance.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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True Advice Financial Services is a trading style of TA and SE Hollom Ltd which is an Appointed Representative of New Leaf Distribution Ltd which is authorised and regulated by the Financial Conduct Authority : Number 460421.
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