Keith Leach

Islamic bank to waive admin fee for refinance customers

Al Rayan Bank has introduced a new range of home purchase plans (HPPs) aimed at making it easier for people to move an existing home finance product to the Sharia-compliant provider.

The ‘fees-assisted’ range will see the lender assist with customers’ refinance costs by waiving or contributing to the fees associated with refinancing home finance to another provider.

Al Rayan will waive the £399 HPP administration fee and the valuation will be paid by the bank – up to a maximum of £600 – while the first monthly payment will see Al Rayan pay a ‘cashback’ of £300 to the customer.

The following rental rates will also be available for fees-assisted HPP customers until 30th June 2019:

  • 60% finance to value – a fixed rental rate of 2.59% and a discounted variable rental rate of 2.79%

  • 70% finance to value – a fixed rental rate of 2.69% and a discounted variable rental rate of 2.89%
  • 80% finance to value – a fixed rental rate of 2.89% and a discounted variable rental rate of 3.09%

These will revert to the Al Rayan Bank variable rental rate and for HPP and HPPS products this was the Bank of England base rate + 3.99%.

The bank’s home finance is based upon the Islamic finance principles of co-ownership agreement with leasing.

This differs to conventional mortgages where money is borrowed from a lender and repaid with interest.

Customers who buy or refinance a property with Al Rayan will enter into a joint ownership agreement where both parties own a share of the property.

Rent will be paid by the customer on the share of the property that the bank owns, while gradually increasing their share in the property through a monthly acquisition payment.

Once all payments have been made, full ownership of the property transfers to the customer without the involvement of interest, which is forbidden in Islam.

The news comes after Al Rayan posted a 228% surge in home finance completions in January as it reported demand for Islamic finance was at an all-time high.

Pictured above: Keith Leach, chief commercial officer at Al Rayan Bank

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