Islamic 10% Deposit “Help to Buy” Scheme

Islamic 10% Deposit Help to Buy Scheme


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Supported by the Help to Buy: HPP guarantee scheme (the Sharia compliant alternative to the conventional Help to Buy: mortgage guarantee scheme).

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.

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.

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 IBB, 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  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’ 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  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 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.


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