1. The Help to Buy scheme has undoubtedly been a huge boost for house hunters and house
builders alike. Recent figures revealed that more than 17,000 homes have been bought through
the Government initiative, with 77 per cent of those being purchased outside of London and the
South East, showing the positive impact it has had in regions including the North East.
So it is very good news that Help to Buy is now being extended by the Government on two fronts.
The scheme will now run until 2020, with £6 billion assigned in the recent Budget to help assist an
estimated 120,000 further buyers. Furthermore, Help to Buy will now apply to Islamic mortgages,
which is a big boost to Islamic homeowners as traditionally their mortgages have been regarded as
being more expensive.
Help to Buy was introduced to help first time buyers to get on the property ladder, but also for
existing homeowners to upsize or relocate to new housing developments. People or families
moving into homes of up to £600,000 value could be eligible for a Government equity loan of 20%
on their property, which is interest free for five years. Combined with a 5% deposit from the
purchaser, this means the buyer can secure a mortgage for 75% of the house price.
The scheme is offered by many house builders, although which plots are covered is at their
discretion. The builder may also choose to offer their own incentives, in addition to Help to Buy,
meaning that potential home owners may be able to secure a great deal on their new property.
There are restrictions to the scheme, however. Anyone buying through Help to Buy cannot own
another property, and the home they are buying must be their main residence. Sub-letting of a
home bought through the scheme is also not allowed. Additionally, home owners must be wary of
increasing the value of their home too much – for example, through the construction of an
extension or conservatory – to avoid falling foul of repayment rules.
Another recent change to Help to Buy has been its inclusion of Islamic mortgages. An Islamic
mortgage is an alternative to a traditional mortgage and conforms with Islamic law, which forbids
both the payment and receipt of interest. Now, many banks and building societies offer these
unique schemes, where rather than lending money to a customer to buy a property, the lender
buys the home for the customer to pay back the purchase price in monthly instalments.
Until quite recently, Islamic mortgages required a 30% deposit, but due to many high street lenders
now offering Islamic mortgages, competition means that level has now been reduced. Help to Buy
will offer Muslims the chance to access mortgages which are appropriate for them and at
accessible financial terms.
There are two types of Islamic mortgage – the Murabaha Mortgage (buying/selling agreement) and
the Ijara Mortgage (declining rent agreement). The Ijara is usually the most popular, due to its
flexibility and the fact it can be used to replace a previous interest mortgage. The Murabaha is
more suited to purchasers with capital in the bank who can pay 20% of the purchase price, and
can be repaid at a fixed rate which can be negotiated between the client and lender.
Exact details of Islamic mortgages, as well as the terms of Help to Buy, are available from your
lender, but ensure you understand exactly how your mortgage will work before you sign up to it.
 Rukhsanah Haroon is a residential property specialist at law firm Sintons. Contact her on -
0191 226 7924 or Rukhsanah.haroon@sintons.co.uk