Introduction
When seeking home financing that adheres to Islamic principles, it's essential to understand the eligibility criteria set by lenders. Sharia compliant mortgages offer individuals an opportunity to align their faith with their financial decisions. In this article, we will explore the eligibility criteria for sharia compliant mortgages (home financing) in the UK, covering both residential and buy-to-let (BTL) properties.
Residential Criteria: For those looking to finance their primary residence, the following criteria generally apply:
Minimum Mortgage Amount: The minimum mortgage amount typically starts at £75,000.
Deposit Requirement: A minimum deposit of 15% is usually required. This means that the borrower must contribute at least 15% of the property's purchase price.
Self-Employment: If you are self-employed, lenders often require a minimum of one year of self-employment history.
Employment History: There is typically a minimum employment duration of three months.
Age Requirement: The minimum age for applicants is 18, and the maximum age is usually set at 75.
Minimum Income: Lenders may have a minimum income requirement, often starting from £15,000 for residential mortgages.
Credit History: Lenders typically consider the borrower's credit history. They usually require no bankruptcy, debt relief order, or Individual Voluntary Arrangement (IVA) in the last three years.
Mortgage Payment History: No missed mortgage payments in the last 12 months are generally expected.
Debt Management: Applicants must not have an active Debt Management Plan.
Defaults and CCJs: No defaults within the last 12 months, with a maximum of one default up to £300 between month 13 and 36. Additionally, no County Court Judgments (CCJs) within the last three years.
Buy-to-Let (BTL) Criteria: For individuals interested in financing buy-to-let properties, the following criteria are typically considered:
Sharia Compliant BTL: Financing options are available for individuals, partnerships, UK registered Limited companies, Limited Liability Partnerships (LLPs), and Special Purpose Vehicles (SPVs).
Green Finance Discounts: Lenders may offer discounts on properties with an A or B Energy Performance Certificate (EPC) rating, promoting environmentally friendly investments.
Property Types: Sharia compliant BTL financing covers both new build houses and flats.
Portfolio Landlords: Lenders often accept portfolio landlords, meaning there is no limit on the number of properties they own.
Minimum Financing Amount: The minimum finance amount for BTL properties typically starts at £100,000.
Deposit Requirement: A deposit of 25% is generally required for buy-to-let financing.
Minimum Income: There is usually no minimum income requirement for BTL financing.
HMO/MUFB Acceptance: Financing options are available for Houses in Multiple Occupation (HMO) and Multi-Unit Freehold Blocks (MUFB).
Financing Options: Lenders offer options for property acquisition with rent or rent-only arrangements.
First-Time Landlords: First-time landlords are often permitted for standard buy-to-let financing.
Conclusion
Sharia compliant home financing in the UK follows specific eligibility criteria set by lenders. For residential mortgages, factors such as deposit, income, credit history, and employment play a crucial role. In the case of buy-to-let properties, considerations extend to property types, landlord experience, and financing options available. By understanding these criteria, potential borrowers can navigate the process of obtaining sharia compliant home financing and make informed decisions aligned with their faith and financial goals.
You should contact a qualified sharia compliant broker for a personalised illustration and advice that is suitable to your needs and requirements. the information stated above should only be used as a guide and does not constitute advice or acceptance. All application are subject to individual banks criteria and full underwriting.
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