Sharia mortgage products - for Mortgage Solutions

Islamic home finance plans as they are officially known have been around for a while. Under Islamic law it's forbidden to charge interest due to conflicting with the Islamic principle of equality. Islamic law does however allow the sharing of risk and profit and therefore property finance products are structured slightly differently to traditional property finance products. They are generally split between the "Ijara" method, a type of home purchase plan whereby the finance provider buys the client's property for them, leasing it back to them while the client repays monthly through a capital element and rent, taking ownership at the end of the lease term assuming all the capital is repaid. Under Sharia principles the rent is seen as a fair price for usage of the property and forms the lenders profit. The alternative is the "Murabaha" method, less popular as it's more expensive overall and less flexible in terms of early repayment. In this structure the finance provider again buys the property but immediately sells it to the client at a higher price, transferring legal ownership. The client would make an initial payment e.g. 20% of the purchase price and then the remainder would be paid monthly for the term required to repay the original capital. There are number of providers, in the bridging space OFFA and Nester. In the longer term finance space: Gatehouse Bank, Al Rayan Bank, Al Ahli, Heylo Housing and more launching all the time. They are not excusive to Muslim clients either, Gatehouse Bank for example offers Finance To Value (FTV) amounts of 80%. higher then many traditional providers are also flexible with accepting UK Expats and International Residents hence attract a lot of offshore clients for that reason. Especially where traditional lenders often curb the gearing of non-UK residents. They also have attractive pricing. Given that their products require a lot more effort compared with traditional lending, they are competitive and I can only see their usage growing. Now it's just a case of getting more solicitors to bring on experts used to accounting for the nuances of the paperwork. We had a particular situation with a client last year where they had a large portfolio of unencumbered properties, but lacked the liquidity to go after some new acquisitions in the auction market. They wanted to borrow against their existing property but without taking out a term product, preferring to avoid long term gearing. We therefore approached Abdulrahman Al-Husari from Nester and together structured a custom 'revolving credit facility', secured against their portfolio, to give them access to a facility of £1m that could be drawn down as needed, 'on demand' for their auction purchasing requirements, all while remaining compliant with Islamic finance principles. As it stands the client ended up selling one of their properties, to fund their purchases rather than have to sacrifice some of their profit, but the product remains available for others. Another of Finanze's custom products, designed for clients.