Key Takeaways
- Most UK mortgage loan providers charge interest, which is haram in Islam; therefore there is a need for halal mortgages in the UK.
- There are several Islamic or Interest-free mortgage providers in the UK, such as Primary Finance, Al Rayan Bank, Heylo Housing, Al Ahli United Bank, and several others.
- It is also important to check if the Islamic lender you are buying from completely complies with Shariah rules.
Interest, also known as Riba, is haram in Islam. Since conventional mortgages involve interest, most Islamic scholars deem them haram in Islam. Fortunately, many halal alternatives to conventional mortgages in the market can help you down your path to homeownership. Let’s check out these companies offering halal mortgage in the UK.
1. Primary Finance
Primary Finance is a halal mortgage in the UK that provides fantastic services. They let Muslims and non-Muslims buy a debt-free home. The investor and the customer jointly purchase the house. The customer is allowed to buy the investor’s share of the property but is never forced to buy it.
Therefore, the customer is only obliged to pay the rent at fair market value for using the share of property that they do not own. During the month, customers who wish to purchase home equity in an installment only pay 50% of the rent. This system is considered ethical as it does not compel homeowners to pay fixed equity payments or interest but still be able to buy the house gradually.
The goal of Primary Finance is to give out ethical home loans that benefit everyone involved in the business activity mutually. Sheikh Haitham Al-Haddad reviews primary Finance products from the Islamic Council of Europe to be Shariah-compliant.
Primary Finance has 4.4-star reviews out of 5 on Trustpilot based on 11 reviews
2. Al Rayan Bank
Al Rayan Bank is another halal mortgage in the UK that offers Home Purchase Plans (HPP) and Buy to Let Purchase Plans (BTLPP). Both of these plans are interest-free and Shariah-compliant. You can refinance a mortgage or take out a new home purchase plan through Al Rayan Bank.
The bank purchases the home jointly with the customer and lets the customer buy their share of the house. Customers can buy the bank’s share of the equity in installments while paying rent for living in the house at the same time. When the customer buys the entire home equity owned by the bank, the ownership of the house is transferred to them. The entire process is interest-free, but the prices are competitive.
The Shariah Supervisory Committee (SSC) of Al Rayan Bank comprises sitting highly experienced and world-recognized scholars who are experts in solving financial problems in the light of the Quran and Sunnah. All debt products offered by Al Rayan Bank are Shariah-compliant and approved by the SSC.
At Smart Money People, Al Rayan Bank has a rating of 3.5 out of 5 stars based on 43 reviews. Dissatisfied homebuyers commented that Al Rayan Bank made it expensive for them to stay halal during a home purchase. Customers complained that they paid very high profit rates, additional fees, and hidden charges that they would not have paid upon buying a conventional mortgage
3. Ahli United Bank
Ahli United Bank, formerly known as the United Bank of Kuwait PLC, also offers halal home purchase plans to UK citizens and expats. The bank offers the same prices and fees to all lenders, who can be individuals or businesses.
Ahli Bank also allows homebuyers to make payments in GBP or a foreign currency that the bank accepts. Primarily, Ahli Bank lends to those looking to buy a property in Prime, Central, and Outer London. They also offer to lend to individuals looking to buy property in other areas of the country.
You can get tailor-made terms based on your income, preferences, and location of the house. The bank accepts loan applications directly from customers and works with mortgage brokers to assist with specific requests.
Products offered by Ahli Bank are certified by the bank’s Shariah Board. The Shariah Board regularly meets with the customers and staff of the bank to discuss different issues and provide clarifications on how the products meet Shariah’s requirements.
Ahli Bank has 3.9 out of 5-star reviews on Glassdoor based on 66 reviews. The homebuyers and other customers who rated one or two stars objected that the customer service of the bank was extremely poor, and customers were not able to resolve problems they had with the bank.
4. Wayhome
Wayhome lets you become a homeowner through an easy-to-follow home purchase plan. Homeowners can buy their house with just a deposit equivalent to 5% of the house’s value. Wayhome offers home loans to a wide range of customers with a pre-tax annual income of £24,000 to 99,000.
The customers pay what they can, such as 5% or 10% share, to buy the house, and the investors pay the rest. The customers pay rent on the portion that the investors own. Although homebuyers pay rent, they can start living in the house as their own. Hang their pictures, paint the walls, and customize them to their liking.
Home can be purchased through monthly lump-sum payments. You can reach out to their agents to get a customized plan that suits you. As you make monthly payments, the bank’s share decreases, and the rent payments become smaller.
The products of Wayhome are certified to be Shariah-compliant by the Amanah Advisors and The Islamic Council of Europe. Wayhome received an average 3.9 out of 5 stars rating on Google Reviews. Most customers who were dissatisfied with their homebuying experience said their application for a home loan was not approved.
Wayhome asked for too many details and kept them waiting for months, only to reject their application in the end. The others said it did not operate in their area.
5.GateHouse Bank
GateHouse Bank is a halal mortgage in the UK that provides a wide range of property purchase plans to UK citizens, expats, and international residents. It operates mainly in England and Wales. GateHouse lets you purchase property jointly with the bank, and your deposit becomes your stake.
The bank buys and owns a big chunk of the property. Homebuyers pay rent to the bank and make lump sum monthly payments to own home equity. If you wish to sell the house, you can do so at any time. GateHouse Bank lets you keep the capital gains earned on your sale, so you only pay the agreed amount to the bank.
Gatehouse’s products and operations are overseen by Gatehouse’s Shariah Supervisory Board (SSB), which comprises experienced Shariah scholars. Among the renowned members of the SSB is Sheikh Dr. Nizam Yaquby, an acclaimed Shariah scholar working in the Finance and Islamic banking industry.
The Board of Directors appointed the SSB at GateHouse Bank. To enhance transparency, the SSB directly reports to the shareholders.
GateHouse Bank has 4.3 out of 5-star reviews on Trustpilot based on 203 reviews. Some homeowners said that the process to purchase a house through GateHouse Bank is not halal as they require home insurance, and there are other loopholes in their home purchase policies.
Someone also complained that the application process is very draining, and after taking all the information, waiting a long time, and demanding guarantees from the applicant’s relatives, the bank did not approve the loan.
6. UBL Bank
UBL lets investors with small portfolios purchase a house and let it go to a third party. It offers a conventional buy-to-let home purchase plan that lets homebuyers and investors jointly purchase the house. This scheme works best for landlords who are looking to profit from home sales.
UBL UK follows Shariah rules and is also regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
UBL Bank has 3.2 out of 5 stars on Trustpilot based on 222 reviews. However, most reviews are from customers who purchased products other than their buy-to-let home purchase plan.
7. Heylo Housing
Heylo Housing is a small project compared to Al Rayan Bank, but it aims to make houses more affordable and accessible for residents across the UK. The lending company charges part rent buy installments, which is a more ethical way to purchase a house.
Currently, Heylo Housing is available in selected areas in the UK and has acquired only 6,000 homes and sold them on part buy-part rent. They have a terrific rating of 4.7 out of 5 stars on Trustpilot based on 916 reviews.
Homeowners said that the process to purchase their own house was very straightforward. The communication went smoothly, and the team kept them informed at every step of the way. Loan approval was quick, and they could purchase the house very swiftly.
Heylo Housing has not indicated on its website if it is Shariah-compliant. Most of its customers are also non-Muslims who want to buy a house through part-rent and part-buy arrangements. The only reason Heylo Housing is included in our review is that if you are looking to buy a house and haven’t had luck with Islamic lenders.
Buying your house through Heylo Housing is a better option than getting a conventional home loan that involves interest.
Conclusion
Have you been wondering if you can get a halal mortgage in the UK? Worry no more! Purchasing your own house is crucial for securing you and your family’s future. There are several home purchase plans offered by Islamic and non-Islamic lenders in the UK that are Shariah-compliant.
Purchasing a house through a Shariah-compliant home purchase plan gives you the peace of mind that you are trying your best to keep your financial matters halal. Check out this article for the different mortgage plans you can use in the UK.