ComparisonsIslamic Finance

Islamic Mortgages in The UK in 2021: The Definitive Guide

As someone who has recently taken out an Islamic mortgage in the UK, I know there’s a bunch of stuff that I wish I’d known at the start.

This 34-page guide is designed to do just that. We will cover everything you need to know as you start on this exciting new chapter of your life. This analysis and information has been compiled over the last 5 years across a whole series of articles and reports and is constantly being updated. It also nicely complements our Islamic mortgage comparison page.

Contents:

  1. Islamic mortgage market in numbers………………………2
  2. Islamic mortgages in the UK: How does it work? ……….3
  3. Is an Islamic mortgage halal or haram? …………………..7
  4. Types of Halal Mortgages……………………………………14
  5. Best Islamic Mortgages in the UK in 2019……………….16
  6. 15 Tips to get a Cheap Islamic mortgage…………………18
  7. Wider Islamic Financing in the UK…………………….…..28
  8. How to get an Islamic mortgage in the UK……………….29
  9. Islamic mortgage UK Reviews……………………………..31
  10. Islamic mortgage Guidance and Resources…………….32

Definitional tip: an Islamic mortgage is the same as a halal mortgage and a “home purchase plan” or “HPP”. We use the terms interchangeably in this guide, and so does the wider market. Don’t worry, they’re all referring to the same thing.

1. Islamic mortgage market in numbers

  1. There are 6 providers of HPP products in the UK today.
  2. There are approximately 2500-3000 residential and buy-to-let Islamic mortgages issued in the UK annually.
  3. Only around 40% of Islamic banks’ incomes and financing assets are linked to retail products (i.e. products to do with everyday people like us). A large chunk comes from commercial and premier products.
  4. Last year Al Rayan made a £6m profit from an income of £39m.
  5. 7% of Muslim adults earn less than £20,000 per annum (p.a.), compared to the 53.1% of UK adults overall. 43.2% earn between £20,000 and £50,000, compared to the 39.5% of all UK adults. 7.1% UK Muslim adults earn over £50,000 which is similar to the overall UK picture which shows that 7.4% of adults earn in excess of this figure.
  6. The majority, 59.5%, of Muslims live in owner-occupied properties. This is under the figure for all UK adults which is 67.9%.

2. Islamic mortgages in the UK: How does it work?

First, what actually is an Islamic mortgage? Well, in the UK there are roughly 3 types of Islamic mortgage structures…To access the complete Guide, please download below.

 

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  • Good morning
    I just have a quick question, because of this current situation. At the moment is it possible to apply for mortgage?

    Thanks
    Kethran

    Reply
    • Yes you can apply – the banks themselves will be best-placed to tell you if they are lending right now.

      Reply
  • Salam, I just wanted reccomendations on which halal bank is best for giving mortgages for properties worth £2.8 million?

    Reply
    • We’d suggest checking out islamicmortgage.co to get a comparison.

      Also – feel free to drop us a line on ibrahim[@]islamicfinanceguru.com and we can point you in the right direction.

      Reply
      • Hi Mr Khan,
        I am a landlord and have a portfolio of 30 properties and about 7 of them are mortgage free. I would like to remortgage them and I am looking for Islamic mortgage. Do you think I can get Islamic morgage through you. Please let me know.

        Kind Regards

        Reply
  • As’Salamu Alaaikum, Thanks for sharing this information. I was wondering if someone could clarify my query please.

    Al-Rayan Bank announced they will help 1st time buyers like “Help-to-Buy” scheme with up to 90% of contribution. Here is the quote from the news on their website “Following the latest Government guidance on the property market, Al Rayan Bank is reintroducing its low deposit 90% and 95% finance-to-value (FTV) Home Purchase Plan (HPP) products”

    My query here is if someone has for example 20% of deposit and he wants to buy a house worth 300000 pounds. Will he still get the support under this scheme even if his Salary calculation shows he is eligible to borrow only 130000 pounds?

    Jazak’Allah.

    Reply
  • Salaam, thanks for your research! What about borrowing to purchase an investment property or multiple properties?

    Reply
  • Salaam Alaikum in terms of halal buy to let mortgages whats the best rates for a relatively low amount let’s say 100k. 75% ltv at least if not a higher deposit to be put down.

    Reply
  • In the ME, typically the bank covers the home insurance element however they require the borrower to avail life insurance which is calculated as a % of the finance value. The premium is paid monthly along with the capital/rent. I would be interested to hear your view on this – is it an acceptable and fair way for the bank to mitigate their risk? and can it be considered fair to say one party pays the home insurance and the other pays for the life insurance without assigning a value to the two (i.e. if two parties were to agree upfront that the first party will pay for one life insurance and the second party will pay for the home insurance without assessing the cost of each, in Sharia is this considered a fair way to split the cost)?

    Following on from that, do you see this as a (positive example) of the banks taking on some extra risk? i.e. if something were to happen to the borrower which renders him unable to make repayment, then the banks are exposed to the risk of the insurance company covering the shortfall.

    Reply

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