About Al Rayan Bank
Update 05/06/2024: Al Rayan Bank has confirmed to us that they now only offer commecial property finance and home purchase plans to non-British customers in Gulf Cooperation Council (GCC) who are purchasing property in the UK.
Al Rayan Bank is the largest and oldest Sharia compliant retail bank in the UK, offering Islamic banking in Britain since 2004. The bank is wholly aligned with the ethical values of Islam, helping families and businesses alike. They are the only Islamic bank in the UK to receive a public rating, holding an Aa3 Moody's rating.
At Teito, our team of experts work with hundreds of lenders, including Al Rayan Bank, to find the perfect finance for you. Whatever your situation, we make sure you get the best deal possible. Get started comparing Al Rayan finance options online now.
What kind of mortgages do they offer?
As a leading Sharia-compliant bank, Al Rayan does not offer traditional mortgages, and instead provides Home Purchase Plans specially tailored to the needs of devout Muslims.
These mortgage alternatives are permitted under the rules of Islam because they are not interest-bearing loans. Al Rayan offers home purchase plans for buying:
The bank’s Home Purchase Plans are based on the Islamic finance principles of co-ownership and leasing. The borrower must pay a deposit and Al Rayan will buy the property on their behalf, while agreeing to sell them their stake in it over time.
Over the term of the agreement, the borrower will pay monthly rent to lease the lender’s share of the property, with these payments continuing until full ownership is achieved.
Home Purchase Plan criteria
The eligibility criteria buying a residential property with one of Al Rayan’s Islamic mortgage alternative agreements is summarised below:
- Property type: Purchase Plans can be used for freehold properties or leasehold properties with an unexpired term of at least 50 years plus the term of financing.
- Credit history: Most Islamic mortgage alternatives require clean credit. Al Rayan will perform a credit check prior to the valuation stage of the application process.
- Buildings insurance: The property must be covered by an ‘all risks’ buildings insurance policy for an amount specified in the valuation report.
- Deposit requirements: Low deposit Home Purchase Plans are available for clients with 5-10% of the property’s value to pay upfront as a downpayment.
What rates to expect
You will not pay an interest rate on an Al Rayan Home Purchase Plan and will instead pay a “competitive” monthly rental rate to ensure the agreement is Sharia compliant.
Products with fixed rental rates for two and five years are available, and the rate is usually lower for clients who fix in for longer. You can also secure a lower rental rate by making a larger down payment as deals with higher finance-to-value ratios typically have higher rates.
Rental rates can vary from one Islamic mortgage lender to the next. Our brokers have access to a range of Sharia compliant banks, can compare the deals available on your behalf, and will match you with the right one for your needs and circumstances.
