{"id":7262,"date":"2022-05-31T19:54:37","date_gmt":"2022-05-31T19:54:37","guid":{"rendered":"https:\/\/ifg.local\/articles\/cheapest-islamic-mortgage-islamicfinanceguru\/"},"modified":"2023-09-21T10:04:19","modified_gmt":"2023-09-21T10:04:19","slug":"cheapest-islamic-mortgage-islamicfinanceguru","status":"publish","type":"post","link":"https:\/\/www.islamicfinanceguru.com\/articles\/cheapest-islamic-mortgage-islamicfinanceguru","title":{"rendered":"Cheapest Islamic mortgage | IslamicFinanceGuru &#8211; IslamicFinanceGuru"},"content":{"rendered":"<p>You want to take out an Islamic mortgage to purchase your home. Naturally, you\u2019re looking for the best deal. So, where can you find this?<\/p>\n<p><!--more--><\/p>\n<p>In this article, we\u2019ll look at a range of purchases and products:<\/p>\n<ul>\n<li>The UK (average house price)<\/li>\n<li>London (average house price)<\/li>\n<li>Buy-to-Let<\/li>\n<li>\u00a31 million houses<\/li>\n<\/ul>\n<p>We\u2019ll use the latest figures from the Office for National Statistics (ONS) to determine the average prices in these areas.<\/p>\n<h2>How we\u2019ll compare the mortgages<\/h2>\n<p>Using the <a href=\"https:\/\/www.islamicfinanceguru.com\/islamicmortgages\/\">IFG mortgage calculator<\/a>, we can calculate the best offering out there.<\/p>\n<p>We\u2019ll use a 30-year term using different deposit amounts.<\/p>\n<p>The <strong>minimum<\/strong> deposit available for an Islamic mortgage is 20% (i.e., you can receive a max of 80% funding of the purchase price). We\u2019ll also check out what a 30% deposit will get you if you can afford that.<\/p>\n<p>If you\u2019re looking for 10% to 5% deposit rates that you might hear in the press, you\u2019ll struggle to get one with an Islamic bank right at this moment due to COVID. But do check our comparison engine as things do change rapidly.<\/p>\n<p>We recommend you try to get to a 20% deposit as a minimum generally in any case as under that things get pretty unaffordable pretty quickly.<\/p>\n<p>Gatehouse has a max FTV of 70% for <strong>finance exceeding \u00a31m<\/strong> (i.e., you need a 30% deposit or more).<\/p>\n<h1>Average UK House Price<\/h1>\n<p>According to the Land Registry, As of&nbsp;<strong>November 2020,&nbsp;<\/strong>the average house price in the UK is&nbsp;<strong>\u00a3249,633<\/strong> and has <strong>risen by 7.6%&nbsp;<\/strong>compared to the previous year.<\/p>\n<p>Where can you get the best deal? Let\u2019s look at the options after putting down different deposit amounts.<strong>&nbsp;<\/strong><\/p>\n<p><strong>Purchase Price: \u00a3249,633.<\/strong><\/p>\n<p><strong>30% <\/strong>deposit = <strong>\u00a374,889.9, borrowing \u00a3174,743. <\/strong><\/p>\n<p><strong>20% <\/strong>deposit<strong> = \u00a349,926.6, borrowing \u00a3199,706.<\/strong><\/p>\n<h2>30% deposit<a ref=\"magnificPopup\" href=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/Picture-1-30-2.png\"><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-us_600_400 wp-image-6584\" src=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/Picture-1-30-600x255-2.png\" alt=\"\" width=\"600\" height=\"255\" srcset=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/Picture-1-30-600x255-2.png 600w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/Picture-1-30-300x128-2.png 300w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/Picture-1-30-100x43-2.png 100w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/Picture-1-30-200x85-2.png 200w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/Picture-1-30-2.png 647w\" sizes=\"(max-width: 600px) 100vw, 600px\"><\/a><\/h2>\n<p>Borrowing <strong>\u00a3174,743<\/strong>, Gatehouse clearly coming out on top here. However, you\u2019ll need to put down a 30% deposit, which is <strong>\u00a374,889.9. <\/strong><strong>&nbsp;<\/strong><\/p>\n<p>If you can\u2019t afford this, consider if you could afford a 20% deposit instead.<\/p>\n<h2>20% deposit<\/h2>\n<p>A 20% deposit will require you to have <strong>\u00a349,926.6 <\/strong>to fund the purchase. Therefore, you\u2019ll need to <strong>borrow<\/strong> <strong>\u00a3199,706. <\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"93\"><strong>Bank<\/strong><\/td>\n<td width=\"87\"><strong>Deal term<\/strong><\/td>\n<td width=\"92\"><strong>Initial Rate<\/strong><\/td>\n<td width=\"178\"><strong>Initial monthly payment<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Gatehouse<\/td>\n<td width=\"87\">2 years<\/td>\n<td width=\"92\">3.19%<\/td>\n<td width=\"178\">\u00a3862.57<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Gatehouse<\/td>\n<td width=\"87\">5 years<\/td>\n<td width=\"92\">3.49%<\/td>\n<td width=\"178\">\u00a3895.65<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Al Rayan<\/td>\n<td width=\"87\">2 years<\/td>\n<td width=\"92\">3.89%<\/td>\n<td width=\"178\">\u00a3940.81<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Al Rayan<\/td>\n<td width=\"87\">5 years<\/td>\n<td width=\"92\">3.99%<\/td>\n<td width=\"178\">\u00a3952.28<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>As with a 30% deposit, Gatehouse again comes out on top, with an increase of <strong>\u00a386. <\/strong>Al Rayan\u2019s cheapest option increases quite a bit \u2013 by <strong>\u00a3142.2<\/strong>.<\/p>\n<h2>10% deposit<\/h2>\n<p>N\/A. Remember, you can only finance a purchase with an Islamic mortgage <em>right now<\/em> if you can afford at least a 20% deposit.<\/p>\n<h1>London<\/h1>\n<p>According to the ONS, the <strong>average price<\/strong> of a home in London was up by 9.7% in the year, to a record of <strong>\u00a3514,000. This was the first time it reached over the \u00a3500k mark. <\/strong><\/p>\n<p>As you can imagine, there are big differences in price depending on where you do ultimately purchase, for example, <strong>Inside<\/strong> <strong>London<\/strong>, Kensington and Chelsea recorded annual growth of 28.6% and an average price of \u00a31.5m.<\/p>\n<p><strong>Further out of the capital<\/strong>, the London borough of Brent likewise saw 20%+ growth. However, the ONS said this partly reflected a decrease in prices between Oct and Nov 2019.<\/p>\n<p>Let\u2019s take the average London house price and see what you\u2019ll get with a 30% and 20% deposit.<\/p>\n<p><strong>Purchase price: \u00a3514,000.<\/strong><\/p>\n<p><strong>30% <\/strong>deposit = <strong>\u00a3154,200, borrowing \u00a3359,800. <\/strong><\/p>\n<p><strong>20% <\/strong>deposit<strong> = \u00a3102,800, borrowing \u00a3411,200. <\/strong><\/p>\n<h2>30% deposit<\/h2>\n<p>A 30% deposit requires you to have <strong>\u00a3154,200<\/strong> available to fund the purchase, requiring a loan of <strong>\u00a3359,800. <\/strong><\/p>\n<div id=\"attachment_6585\" style=\"width: 610px\" class=\"wp-caption aligncenter\">\n <a ref=\"magnificPopup\" href=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/2-30-2.png\"><img decoding=\"async\" aria-describedby=\"caption-attachment-6585\" loading=\"lazy\" class=\"size-us_600_400 wp-image-6585\" src=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/2-30-600x192-2.png\" alt=\"\" width=\"600\" height=\"192\" srcset=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/2-30-600x192-2.png 600w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/2-30-300x96-2.png 300w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/2-30-100x32-2.png 100w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/2-30-200x64-2.png 200w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/2-30-2.png 639w\" sizes=\"(max-width: 600px) 100vw, 600px\"><\/a> <\/p>\n<p id=\"caption-attachment-6585\" class=\"wp-caption-text\">Offers with Average London House price<\/p>\n<\/div>\n<h2>20% deposit<\/h2>\n<p>You\u2019ll need<strong> \u00a3102,800 of your own money <\/strong>to fund the purchase, <strong>borrowing \u00a3411,200. <\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"93\"><strong>Bank<\/strong><\/td>\n<td width=\"87\"><strong>Deal term<\/strong><\/td>\n<td width=\"92\"><strong>Initial Rate<\/strong><\/td>\n<td width=\"178\"><strong>Initial monthly payment<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Gatehouse<\/td>\n<td width=\"87\">2 years<\/td>\n<td width=\"92\">3.19%<\/td>\n<td width=\"178\">\u00a31,776.06<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Gatehouse<\/td>\n<td width=\"87\">5 years<\/td>\n<td width=\"92\">3.49%<\/td>\n<td width=\"178\">\u00a31,844.18<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Al Rayan<\/td>\n<td width=\"87\">2 years<\/td>\n<td width=\"92\">3.89%<\/td>\n<td width=\"178\">\u00a31,937.14<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Al Rayan<\/td>\n<td width=\"87\">5 years<\/td>\n<td width=\"92\">3.99%<\/td>\n<td width=\"178\">\u00a31,960.76<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h1>Buy-to-Let<\/h1>\n<p>This is a great investment option. You can use the rental income to pay off the mortgage and there are Islamic banks that offer BTL mortgages.<\/p>\n<p>Let\u2019s use the average UK house prices and see who has the best deal if you were to use the <strong>rent and acquisition <\/strong>repayment type<strong>.<\/strong> Just to note, the <strong>rent only<\/strong> repayment type has cheaper monthly fees.<strong>&nbsp;<\/strong><\/p>\n<p><strong>Purchase Price: \u00a3249,633.<\/strong><\/p>\n<p><strong>30% <\/strong>deposit = <strong>\u00a374,889.9, borrowing \u00a3174,743. <\/strong><\/p>\n<h2>30% deposit<\/h2>\n<p>A 30% deposit requires you to have <strong>\u00a374,889.9 of your own money, borrowing \u00a3174,743 from the bank. <\/strong><\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"93\"><strong>Bank<\/strong><\/td>\n<td width=\"87\"><strong>Deal term<\/strong><\/td>\n<td width=\"92\"><strong>Initial Rate<\/strong><\/td>\n<td width=\"178\"><strong>Initial monthly payment<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Gatehouse<\/td>\n<td width=\"87\">2 years<\/td>\n<td width=\"92\">3.69%<\/td>\n<td width=\"178\">\u00a3803.32<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Gatehouse<\/td>\n<td width=\"87\">5 years<\/td>\n<td width=\"92\">4.05%<\/td>\n<td width=\"178\">\u00a3839.29<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Al Rayan<\/td>\n<td width=\"87\">2 years<\/td>\n<td width=\"92\">3.89%<\/td>\n<td width=\"178\">\u00a3823.21<\/td>\n<\/tr>\n<tr>\n<td width=\"93\">Al Rayan<\/td>\n<td width=\"87\">5 years<\/td>\n<td width=\"92\">4.39%<\/td>\n<td width=\"178\">\u00a3874.01<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Gatehouse again comes out as the cheaper option.<\/p>\n<p>It\u2019s important to note the <strong>fees<\/strong> are much higher on a BTL. Al Rayan charge set up fees of \u00a31,747.43. Gatehouse charge an application fee of 1% (min \u00a3999).<\/p>\n<h1>\u00a31 million<\/h1>\n<p>There are now 563,240 homes worth more than \u00a31 million in Britain according to <a href=\"https:\/\/www.thetimes.co.uk\/article\/theres-a-wave-of-new-property-millionaires-outside-london-are-you-one-of-them-s2326cjv7\">The Times<\/a>. Interestingly, most of them are outside of London, just 6,657 were in the capital.<\/p>\n<p>As we mentioned at the start, Gatehouse has a max FTV of 70% for <strong>finance exceeding \u00a31m<\/strong> (i.e., you need a 30% deposit or more).<\/p>\n<h1>30% Deposit<\/h1>\n<p>If you have a spare 300k, below are the best deals for a \u00a31m purchase.<\/p>\n<div id=\"attachment_6586\" style=\"width: 610px\" class=\"wp-caption aligncenter\">\n <a ref=\"magnificPopup\" href=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-2.png\"><img decoding=\"async\" aria-describedby=\"caption-attachment-6586\" loading=\"lazy\" class=\"size-us_600_400 wp-image-6586\" src=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-600x191-2.png\" alt=\"\" width=\"600\" height=\"191\" srcset=\"https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-600x191-2.png 600w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-300x96-2.png 300w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-768x245-2.png 768w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-100x32-2.png 100w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-200x64-2.png 200w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-700x223-2.png 700w, https:\/\/24915384.fs1.hubspotusercontent-eu1.net\/hubfs\/24915384\/Imported_Blog_Media\/1-million-30-deposit-2.png 941w\" sizes=\"(max-width: 600px) 100vw, 600px\"><\/a> <\/p>\n<p id=\"caption-attachment-6586\" class=\"wp-caption-text\">best deals for a \u00a31m purchase.<\/p>\n<\/div>\n<h1>Conclusion<\/h1>\n<p>Gatehouse is clearly the cheapest provider in a number of categories right now. Their follow-on rate is also cheaper than Al Ryan\u2019s. However, you may want to consider other factors, such as customer service before you lock yourself in. Also bear in mind that rates change rapidly in this market.<\/p>\n<p>If you want to check for yourself, use the <a href=\"https:\/\/www.islamicfinanceguru.com\/islamicmortgages\/\">IFG Mortgage Calculator<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You want to take out an Islamic mortgage to purchase your home. Naturally, you\u2019re looking for the best deal. So, where can you find this?<\/p>\n","protected":false},"author":61,"featured_media":7263,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","wds_primary_category":0},"categories":[9,6,7],"tags":[33],"acf":[],"_links":{"self":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts\/7262"}],"collection":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/comments?post=7262"}],"version-history":[{"count":0,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts\/7262\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/media\/7263"}],"wp:attachment":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/media?parent=7262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/categories?post=7262"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/tags?post=7262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}