Islamic Bank of Britain
Other product features include a no early settlement charge for clearing the finance in full early, even during a fixed rental rate period.
Commenting on the new deals, Imran Pasha, Head of Sales and Service, Islamic Bank of Britain said: “IBB’s fixed rental rate BTLPPs are ideal for landlords looking to fix their outgoings over the next two years.
“The deals have been launched in response to growing demand for Sharia compliant finance as the Buy to Let market continues to enjoy a resurgence.”
As a Sharia compliant product, IBB’s BTLPP differs from a mortgage where the customer borrows money from a lender, which is then repaid with interest.
A BTLPP uses the Islamic finance principles of coownership (Diminishing Musharaka) with leasing (Ijara), where IBB and the customer buy the property as partners and the customer pays rent on IBB's share in the property.
At the end of the term, when all acquisition payments have been made and the finance has been settled, ownership of the property transfers fully to the customer.
The main difference between a BTLPP and a conventional mortgage is that the lending/borrowing relationship does not exist. Instead, BTLPPs are based on co-ownership and lease agreements arranged using two separate principles of Islamic finance termed as the rental and acquisition elements.
As an Islamic bank IBB does not use any interestbearing products to finance customer’s homes. Instead it uses its own funds, or the savings deposits from its customers, all managed entirely in accordance with ethical and Sharia principles.