Islamic Bank Offers Buy to Let Loans for First Time

Islamic Bank Offers Buy to Let Loans for First Time

11:00 AM, 4th December 2011, About 12 years ago 5

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Islamic Bank of Britain has joined the throng as the latest lender to offer buy to let mortgages to landlords.

The IBB will consider applications from landlords of any faith for a Sharia-compliant mortgage.
The mortgage package is a 75% loan-to-value deal at 5.49% variable with a 1% arrangement fee.

Limits on lending include a maximum of five properties per landlord portfolio, a property value of no more than £500,000 outside London and £750,000 in the capital.

The loan to value on homes in London worth over £500,000 drops to 65%.

Speaking for the bank, Simon Walker said: “Buy-to-let is popular with investors again. Rental yields are increasing and property is seen as a good long-term investment. IBB’s Sharia compliant purchase plan will help fuel this growing sector by catering for landlords looking for Sharia compliant finance.”

As a Sharia product, IBB’s lending is based on joint ownership and rent. The landlord and bank buy the property jointly and the monthly payment increases the customer’s share in the property and includes rent on the share that the bank owns.

At the end of the term the customer will own the property outright.

Leeds Building Society has fee-assisted buy-to-let mortgages, with rates starting from 4.49% fixed for two years at 60% loan to value – rising to 4.99% at 70% loan to value.

Interest rates on fee-paying deals are also down by up to 0.40%.

Included are a free valuation up to £335 and free in-house legal services for standard remortgages.

Phil Coombes, head of intermediary sales at Leeds BS, said: “The society is benefiting first-time landlords, who may require help with up front costs, by offering market leading fees assisted deals across two, three and five-year periods.”

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John Curtis

14:00 PM, 7th December 2011, About 12 years ago

Good to see a new approach to banking, the UK banks have had it their way for far to long.
Will the landlord be able to claim all the tax deductible items or will the bank as the largest shareholder claim theirs. As the landlord will be the minority shareholder will any risk be shared or will the landlord take all the risk and the bank just take the money although they own the majority of the property.

Mark Alexander - Founder of Property118

17:40 PM, 7th December 2011, About 12 years ago

Hi John

Great questions, I can only guess at the answers at this stage.

I suspect the rental element will be able to be offset as an expense for tax purposes and that the banks only risk is in the event of the borrower defaulting and the sale of the property combined with the borrowers personal conevant not meeting the liability to the bank.

My personal opinion of the scheme is that it's an expensive way for the Muslim faith to borrow money without controvening any of the 'rules' of their religion. I can't see a good commercial reason for none Muslims to utilise the scheme. Just an opinion, I have nothing against the Muslim faith or any others for that matter.

I would very much appreciate reading comments from a Muslim landlord.

20:38 PM, 7th December 2011, About 12 years ago

Re the comment above about off setting the rental element against tax liability,- if this is possible it would be the equivalant of getting relief on both the capital and interest from a repayment BTL mortgage. Is this possible?

Mark Alexander - Founder of Property118

20:45 PM, 7th December 2011, About 12 years ago

Now that's an interesting thought. It's not the way I had read into it though. My interpretation was that rentals replaced interest and that rent reduces as capital is repaid.

0:11 AM, 10th December 2011, About 12 years ago

Would Sharia compliant BTL mortgages be one way of avoiding the stupid proposedEU regulation due to be most like enforced in 2013 preventing LL from obtaining a BTL mortgage on rental income criteria.
It would be interesting to hear from BTL lenders as to whether his proposed EU BTL regulation would include Sharia compliant BTL mortgages.
You can see where I am going can't you.
How clever might these EU bods be.
If not that then I am of to the bookshop to get a copy of the Koran.
I could see lots of LL in the PRS becoming very empathetic to the Muslim religion.
Even making contributions to their local mosque to validate their sharia BTL mortgage application.
Anybody got any thoughts on this one.

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