Al Rayan Bank has launched Sharia compliant Buy to Let Purchase Plans (BTLPPs) for the Scottish market.
The bank claims the BTLPPs will enable Scottish landlords to benefit from occupancy payment rates from 2.99% and will expand its existing home and property finance range for Scotland, which already provides Sharia compliant Home Purchase Plans (HPPs) and commercial property finance (CPF).
The occupancy payment rates for BTLPPs in Scotland are as follows:
- 35% deposit contribution (65% finance to value): fixed occupancy payment rate of 2.99% and discounted variable occupancy payment rate of 3.19% until 31 December 2018
- 25% deposit contribution (75% finance to value): fixed occupancy payment rate of 3.39% and discounted variable occupancy payment rate of 3.49% until 31 December 2018
Following the fixed or discounted period, all occupancy payment rates will revert to the Al Rayan Bank Variable Occupancy Payment Rate. For BTLPP products this is currently Bank of England Base Rate (BBR) plus 4.99%.
Unlike conventional buy-to-let mortgages, where the landlord borrows money from a lender and pays it back with interest, Al Rayan Bank’s buy-to-let customers in Scotland will buy their properties using the Islamic finance principle of co-ownership (Musharaka), purchasing the property together with the bank, as partners. Each month they will make an acquisition payment which will increase their stake in the property. They will also pay an occupancy payment under a co-beneficiaries agreement for use of the bank’s share of the property. At the end of the finance term, when all payments have been made the customer will have sole ownership of the property.
Sultan Choudhury, Al Rayan Bank CEO, said: “We’re delighted to continue the momentum of our successful launch in Glasgow with the announcement of Buy to Let Purchase Plans for Scotland.
“Islamic buy-to-let property finance is an important addition to the Scottish market and will provide landlords with a practical alternative to conventional, interest-bearing, property finance products; one that will not compromise their values or faith.”