Your home purchase plan works in a similar way to a mortgage. Fixed and variable rates may be available, except they are not rates of interest but rental rates.
With a Shariah compliant home purchase plan, you buy the property jointly with us. Your deposit is your stake, we hold the remaining stake and the property is registered in our name. We instruct a solicitor, who works alongside yours during the purchase process.
Your monthly payment is made up of either rent if you have a rent-only agreement, or rent and acquisition if you have an acquisition and rent agreement. Rental rates are calculated to reflect the shares you and we own in the property.
- Acquisition and Rent product - This is the Shariah compliant alternative to a conventional repayment (capital & interest) mortgage. Over the agreed finance term, you make a monthly payment consisting of a rental payment (for use of our share of the property) and an acquisition payments (to increase your share in the property). With each acquisition payment, your share increases, and ours diminishes. The makeup of your monthly payment changes over time. As our share of the property gets smaller, so does the rental portion of your payment, so more and more of the monthly payment goes towards the acquisition of our share. When all the payments are made, the property transfers into your name.
- Rent Only product - This is the Shariah compliant alternative to a conventional interest-only mortgage. Over the agreed finance term, you make monthly rental payments (for use of our share of the property), but no acquisition payments, so your share doesn’t go up just by making your monthly payments. You undertake to acquire our share of the property at the end of the finance term. If you have a rent-only product, it’s your responsibility to look after any financial arrangements that you expect will provide a lump sum big enough for you to buy our share at the end of the product. When our entire share is acquired, the property transfers into your name
With both types of products, you can sell the property at any time, just like you can with a conventional mortgage. There are no early payment charges, but there is an account settlement fee. When you sell, you only have to pay the original cost of the property contributed by the bank, less any acquisition payments you may have made. Any increase in the property value benefits you, not us, but just like with a conventional mortgage, a decrease in value also affects you.
In addition, please view our Home Purchase Plan video.