Sharia Compliant Mortgages
The Home Purchase Plan (HPP) is a Sharia compliant alternative to a conventional mortgage that helps you to buy or refinance your home in an ethical way that doesn’t involve interest.
Both you and the bank contribute towards the purchase or refinance of your chosen property. This means that you and the bank are partners in the property, where the relevant shares relate to the initial proportion of the contributions made.
The bank agrees to sell its share of the property to you over a period known as the finance term. The period of the finance term is decided by you, but should be between 7 and 30 years.
Each time you make your monthly payment, your share in the property increases as the bank’s share gets smaller.
The bank also leases its share of the property to you, for which you pay a monthly rent. Therefore, your monthly payment consists of two elements: an acquisition payment (known as capital for a conventional mortgage), which is the payment you make to acquire the bank’s share in the property; and a rental payment (known as interest for a conventional mortgage)which is the charge for renting the bank’s share of the property.
As you are paying a monthly rental to the bank, you are paying for the use of the bank’s share, as opposed to conventional banking where you pay for the use of the money to finance the property.
The arrangement with the lender therefore means that you do not pay any interest, as no loan exists between you and them.
Once you have fully acquired the bank's share in the property, your monthly payments cease and full ownership of the property transfers to you.
Please contact us for further information including the process, terms and current rates.