5% Deposit | New! | Islamic Finance Solutions

Podcast Hosts:

Gemma – Host
Ifthikhar (Ifthi) – Accountant, Mortgage Broker, and Founding Director at WIS

Introduction

Gemma:
Lenders have introduced a home purchase plan product for first-time buyers with a 5% deposit.
Previously, during the COVID-19 pandemic, Islamic finance providers increased minimum deposits to 20%.
Now, the deposit requirement has come down to 5%, making it easier for first-time buyers to access Islamic finance and get on the property ladder.

Q&A Discussion

Q1: Who can apply for the 5% deposit Islamic finance?
Ifthi:
Primarily designed for first-time buyers.
Other buyers are unlikely to qualify for the 5% deposit option.

Q2: What about clients who want to refinance or move home?
Ifthi:
Previously, a 20% deposit was required.
Under the new schemes, a 10% deposit is sufficient for those moving homes or refinancing from another Islamic or conventional mortgage.

Q3: What are the minimum property value and finance amounts?
Ifthi:
Minimum property value requirement has reduced.
Previously, providers required £200,000 investment; now it’s around £100,000.
Example: For a property costing £105,000, a 5% deposit is required, and the bank provides the remaining investment.

Q4: Can you switch from a conventional mortgage to an Islamic finance solution?
Ifthi:
Yes, switching is possible.
Legal fees are involved because Islamic finance is structured differently from conventional mortgages.
Fees are generally reasonable, and the option is now available for those seeking Islamic solutions.

Q5: Can foreign nationals permanently residing in the UK apply?
Ifthi:
Yes, if they have:
Worked in the UK for at least 12 months, and
Have a valid visa and passport.
Deposit for foreign nationals is typically 20%, but first-time buyers meeting the criteria can access the 5% deposit scheme.

Q6: Do applicants need to be Muslim or of a particular faith?
Ifthi:
No, this is a common misconception.
Islamic finance is open to anyone, regardless of religion.

Q7: Are there any advantages compared to conventional mortgages?
Ifthi:
No early repayment charges, unlike conventional mortgages.
Attractive for buyers who may want to repay or move within a few years.

Closing Remarks

Gemma:
Points may not apply to everyone; consult an advisor if unsure.
WIS acts as a broker to find suitable home purchase products and introduce you to the right bank.
Reminder: Mortgages are secured against your home or property and may be repossessed if repayments are missed.