Who are Al Rayan Bank Mortgages?

Al Rayan Bank mortgages is a Sharia-compliant lender. This means its mortgages charge rent instead of interest.

Al Rayan Bank mortgages follow Sharia law, which forbids companies from charging interest. This means its mortgages work a little differently from other mortgage lenders in the market and may not be suited for you based on your needs.

Al Rayan bank mortgage Eligibility criteria

To be eligible for an Al Rayan Bank mortgage, you must:

  • Be aged 21 or over
  • Be a UK resident or a UK national living abroad
  • Secure the loan against a property valued at least £80,000
  • Al Rayan bank mortgage loans can be between £30,000 and £1,500,000 depending on your circumstances. Mortgage terms can range between 7 and 32 years.

When submitting for al Al Rayan bank mortgage you will typically need the same information as you would have provided with other mortgages. This means your income and outgoings.

What types of mortgage does Al Rayan Bank provide?

Al Rayan Bank home purchase plan

With an Al Rayan Bank mortgage which is referred to as a home purchase plan, you buy a percentage of the home with your mortgage deposit which will usually have to be from 5% as Al Rayan Bank offers Loan to value (LTV) rates of 95%.

The rest of the property is owned by the bank and you simply rent it out with your Al Rayan bank mortgage bus as you make these rent payments your share in the property increases.

The rent payments, in essence, cover your increase in shares and also cover your rent payment to the lender.

At the end of the Al Rayan bank mortgage term, you will own the property in full.

The Al Rayan bank home purchase plan can either be a fixed rate or discount rate plan.

Al Rayan bank home purchase plan Fixed rate: With the fixed rate home purchase plan the “rental rate” is fixed for either two or three years. After this period, the rate will revert to the Al Rayan Bank Variable Rental Rate, which is fixed to a specific percentage above the Bank of England base rate. This product has a one-off administration fee attached.

Al Rayan Bank Home Purchase Plan discounted rate:

With the discount rate home purchase plan the “rental rate” is fixed at a specific percentage below the Al Rayan Bank Variable Rental Rate. It will revert back to this rate after two years.

Al Rayan bank’s version of an interest-only mortgage involves an agreement to make these rental payments for the length of the term, with an option to buy the bank’s share of the property outright afterwards.

Al Rayan bank Buy-to-let Purchase Plan:

With this plan, you can either have a discounted rate or a fixed rate to purchase a buy to let property. You will need to put down a mortgage deposit of at least 25% of the property price.

The Al Rayan buy to let purchase plan has a 1% product fee which is charged on the total amount borrowed.

Al Rayan Bank’s mortgages have no early repayment charges.

You can refinance from a traditional mortgage to a sharia mortgage with Al Rayan bank mortgages and they will waive any administration fees as well as valuation fees and offer cash back of up to £300 for your remortgage.

How do I contact Al Rayan Bank?

You can discuss your queries about Al Rayan mortgages by visiting a local branch, filling out the contact form on its website or calling 0800 4083 093. Phone lines are open on weekdays from 9 am to 7 pm or Saturdays between 9 am and 1 pm.

How do I apply for an Al Rayan Bank mortgage?

You can apply for an Al Rayan Bank mortgage by visiting one of its branches, calling 0808 231 3363 or filling out its online application form.

If you are considering getting a mortgage then using a mortgage broker may be a good choice as mortgage brokers usually have access to many more products than any specific mortgage lender.

Mortgage brokers will also usually have access to specific deals from mortgage lenders as well as experience on which mortgage lenders will be more likely to accept your case. This will help you avoid getting rejected on a mortgage application and having to build credit due to the damage a rejection might do to your credit score.

If you have bad credit or are self-employed then specialist mortgage brokers such as bad credit mortgage brokers or self-employed mortgage brokers may be useful.

You may also want to consider the government schemes which are available for first-time buyers and home movers such as:

  • Lifetime ISA- gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
  • Help to buy ISA- gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000
  • Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75% after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to own- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy- allows you to buy your home at a discount price.
  • Preserved right to buy- same as above.
  • Right to acquire- same as above.

Disclaimer: The offers compared on this page are chosen from a range of products Huuti has access to track details from and is not representative of all the products available in the market. Unless indicated otherwise, products are displayed in no particular order or ranking. The use of terms “Best”, “Top”, “Cheap” including variations, are not product ratings and are Huuti is not recommending anything here. You should consider seeking independent financial advice when necessary and confirm the validity of the information above for your personal circumstances. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP YOUR MONTHLY REPAYMENTS

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.