Home Purchase Plan
10% deposit Home Purchase Plan (HPP), supported by the Help to Buy: HPP guarantee scheme.
Supported by the Help to Buy: HPP guarantee scheme (the Sharia compliant alternative to the conventional Help to Buy: mortgage guarantee scheme), Al Rayan Bank has launched a new HPP for people with smaller deposits.
So, if you have minimum 10% deposit and are looking to buy your first home, or move home, without compromising the principles of your faith, you can now do so.
- Maximum finance to value (FTV) 90% (10% deposit required)
- Rental rate fixed at 3.69% until 31 December 2019
- From 1 January 2020, rental rate reverts to Al Rayan Bank Variable Rental Rate which for HPP = 4.24% (Bank of England Base Rate + 3.99% margin)
- Administration fee of £999
About the Help to Buy: HPP guarantee scheme
Help to Buy is a government-backed scheme which aims to help people who can afford monthly home finance payments but have relatively small deposits.
The Help to Buy: HPP guarantee scheme works in a similar way to the Help to Buy: mortgage guarantee scheme, but takes into account the different way that a HPP is structured to avoid interest, which is prohibited in Islam. It enables Islamic banks to purchase a guarantee for their Home Purchase Plans where the consumer has a deposit of between 10% and 20%.
Specific criteria apply to the Help to Buy: HPP guarantee scheme and our 10% deposit Home Purchase Plans are available under the Scheme. If you are in any doubt about whether you are eligible for a 90% FTV HPP, please contact us.
Frequently asked questions
How does the Help to Buy: HPP guarantee scheme work?
Under the Help to Buy: HPP guarantee scheme (the Scheme), the Government offers HPP providers the option to purchase a guarantee on Home Purchase Plans where a customer has a deposit of between 10% and 20%.
Because of this support, participating providers, such as Al Rayan Bank, are able to offer HPP products to customers with small deposits.
How does the Help to Buy: HPP guarantee benefit me?
If you can afford the payments on a HPP on a new build or an existing property but don’t have a large deposit, this Scheme will benefit you by giving you access to low deposit Home Purchase Plans. This means you won’t have to wait and save up for a large deposit to buy or move home.
Does the scheme guarantee my payments?
The Scheme does not guarantee your payments – the guarantee protects your finance provider (i.e. Al Rayan Bank) rather than you against losses. The benefit of Help to Buy to the customer is the ability to get a Home Purchase Plan with a lower deposit. You are responsible for paying your Home Purchase Plan under this Scheme. Customers could lose their home if they do not keep up their Home Purchase Plan payments on a Help to Buy supported Home Purchase Plan in exactly the same way as any other Home Purchase Plan.
Am I eligible for the Scheme?
Any customer seeking to benefit from the Help to Buy: HPP guarantee scheme will need to meet the participating providers’ (i.e. Al Rayan Bank’s) affordability and other criteria in the normal way.
- In addition there are some further eligibility requirements which you will need to meet in order to get a Help to Buy supported Home Purchase Plan. In particular:
- The Home Purchase Plan must have a finance to value (FTV) of between 80-90% (i.e. a deposit between 10% and 20% is needed)
- The Home Purchase Plan must be a residential Home Purchase Plan not a Buy To Let Purchase Plan (BTLPP), so you will be planning to live in your house and not rent it out
- The property you want to buy must be in the UK and the purchase value must be £600,000 or less
- The customer must pass the provider’s credit tests and must be able to verify income
- The Home Purchase Plan must be used to buy your only property, so you cannot use it to buy a second or further home. Customers will be asked to declare that they have no interest in any other property, or will have no interest in any other property once the Home Purchase Plan completes, as part of the application process
- The Scheme can be used for refinancing
- An applicant cannot take out a Home Purchase Plan in conjunction with a guarantor
- The Home Purchase Plan must be taken out by an individual or individuals – it cannot be taken out by a company
- The Scheme cannot be used in conjunction with any other Government schemes, such as Shared Equity or Shared Ownership. The deposit for the property can also not come from Publically-Assisted loans
Do I have to be a First Time Buyer to benefit from the Scheme?
The Help to Buy: HPP guarantee scheme is available to all customers, so first time buyers and existing home owners can access Home Purchase Plans that will be supported by the Scheme. In addition, the Scheme is available for home purchases and refinancing.
Can joint customers apply for a Help to Buy: HPP guarantee scheme supported Home Purchase Plan?
Yes. However, all customers will have to meet all the eligibility criteria for the Help to Buy: HPP guarantee scheme, including declaring that none of the customers will have an interest in any other property once the sale is completed.
Can I buy a new build property under the Scheme?
The Help to Buy: HPP guarantee scheme can help you buy a newly built home or an existing property with a deposit of as little as 10%.
Are there any additional risks associated with a product backed by The Help to Buy: HPP guarantee scheme?
Providing a smaller deposit can put you at greater risk of negative equity. If house prices fall and this situation arises, you may not have enough equity in the property to clear your finance. This may leave you with a shortfall that you would need to meet from your savings or other sources. However, this is a risk associated with higher finance products and not the Help to Buy: HPP guarantee scheme itself.
What is the difference between HPPs guaranteed by the Help to Buy: HPP guarantee scheme and those not in the Scheme? Do I get preferential treatment as a result of my HPP being in the Scheme?
The relationship between you and your HPP provider (i.e. Al Rayan Bank) remains exactly the same as it would with any other HPP. You and your HPP provider’s rights and responsibilities do not change as a result of the existence of the guarantee. The inclusion of HPPs in the guarantee scheme does not mean that you will be treated preferentially by your HPP provider.
The only difference between an HPP under the guarantee scheme, and any other similar product offered by an HPP provider outside of the Scheme, is the existence of the guarantee from Government to the HPP provider. This is completely separate to the relationship that you have with the HPP provider.
What happens if my circumstances change after I have taken out the HPP?
As with all HPPs, you should talk to your HPP provider as soon as your circumstances change. If you fall into financial difficulties, you should speak to your HPP provider. You may also wish to seek independent advice as soon as possible.
You are able to get free and impartial information and advice on money matters from the Money Advice Service. Their advice is available online at www.moneyadviceservice.org.uk, face-to-face, or by calling the Money Advice Service helpline on 0800 138 7777.
You will not be treated differently by your HPP provider if you have a HPP which is included in the HPP guarantee scheme. If the HPP provider has to take full ownership of the property, you will be responsible for paying any shortfall between the amount outstanding on the HPP and the amount recovered once the property is sold.
Will the Government have access to my personal information and how will it be used?
Your HPP provider (Al Rayan Bank) will need to provide your personal information to the Scheme administrator, acting on behalf of the Government. However, this is subject to strict controls and will only be used for specific purposes. This will include ensuring that your HPP is, and remains, eligible for the guarantee scheme and to assess, from time to time, the current status of your HPP, and the potential exposure for the Government under the guarantee.
The Government may also use your personal information for the following purposes:
- Complying with any present or future law, rule, regulation, guidance or directive
- Establishing, exercising or defending legal rights
- Complying with demands or requests made by domestic regulators and law enforcement authorities (whether or not having the force of law)
- Complying with any subpoena or court process or in connection with any litigation.
Where can I find further information about how my personal information will be used?
For further details about how your personal information will be used by or on behalf of the Government, please visit www.helptobuy.org.uk.
How do I apply for a product backed by The Help to Buy: HPP guarantee scheme?
You can apply for product backed by The Help to Buy: HPP guarantee scheme in the same way as any other HPP product from Al Rayan Bank.
Please ring our HPP Specialist Sales team on 0800 408 0435 (Mon - Fri 9am - 7pm, Sat 9am - 1pm)
Check your eligibility by using our Agreement in Principle or request a call back at www.alrayanbank.co.uk/home-finance
You can visit one of our branches or agencies that are located throughout the country.
|Finance amount:||£30,000 to £540,000|
|Minimum property value:||£80,000|
|Term:||7 - 33 years|
|Maximum number of applicants:||Up to four applicants (all applicants must be owner occupier)|
Administration fee - £999
Valuation and legal fees: Paid by the applicant(s)
Al Rayan Bank has created a panel of solicitors who are experienced in the Islamic finance conveyancing process. If you choose to proceed with one of our panel solicitors, Al Rayan Bank will make a £400 (including VAT) contribution towards the Al Rayan Bank's legal costs. However, you are not obliged to use one of our panel solicitors. For more information, please refer to the HPP Tariff List
|Minimum age of applicants:||21 years|
- The fixed rental rate will end on 31 December 2019
- The new rental rate will be effective from 1 January 2020
- Rental rate will be reviewed quarterly thereafter
- No additional acquisition payments are permitted during the fixed rental period
- Following the expiry of the fixed rental rate, additional acquisition payments can be made in the month of each rent review
- The Bank reserves the right to change the margin on its products, however, a cap applies of 2%
- Therefore, Al Rayan Bank cannot increase the margin on its HPP products by more than 2% over the margin that applied at the outset
- Al Rayan Bank cannot change its margin whilst a fixed rent rate applies
- You will be given at least 30 days’ advance notice of any changes in the pricing structure
- The customer has the option to sell the property at any time without any penalties (subject to an administration fee to cover any costs)
Forms & other information
How to apply
There are a number of ways to apply for a HPP or to request more information:
- Please ring our HPP Specialist Sales team on 0800 408 0435 (Mon - Fri 9am - 7pm, Sat 9am - 1pm)
- Check your eligibility by using our Agreement in Principle
- Or to request a call back please click here
- You can visit one of our branches or offices that are located throughout the UK
For your own benefit and protection, you should carefully read some important information leaflets we have prepared about HPP, before you complete the application. These documents can be found in the Forms & other information section.
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HPP case study
Meet Ahmed and Aisha, who are looking to buy a larger house for their growing family.
Home Purchase Plan standard process
There will be four key parties involved in the processing of your HPP: you, your solicitors, Al Rayan Bank and Al Rayan Bank’s solicitors. The role each plays is outlined below in our high level overview of the standard process.