Frequently asked questions
We’ve put together the answers to some of the most commonly asked questions about Islamic Home Finance. If you have a question that we haven’t answered here, please call us on 0845 6007 786 (9am - 5pm Monday to Friday).
How does Islamic Home Finance fit with my faith?
Who provides the money for my home finance?
How can you calculate my monthly payments using the LIBOR rate? This seems like interest under another name. Is this allowed?
What do you do if something happens to me and I can't make the repayments?
I want to sell my property. Will you benefit from any increase in the value?
Can I buy my council property through the Government's right-to-buy scheme?
Do you have any other Islamic finance services?
Who decided that Islamic Home Finance is Shariah approved?
How does Islamic Home Finance fit with my faith?
Our Islamic Home Finance is based on the accepted and widely used Islamic finance principles of Ijara and Diminishing Musharaka. These have been approved by our Shariah Committee.
You make two contracts with Bristol & West:
In this scheme, Bristol & West and you jointly own the property although the title deeds will be in Bristol & West’s name. You will then buy back Bristol & West’s share over a number of years. During that period Bristol & West will charge you rent for living in the property on the percentage of shares it has. With each payment your share of the property increases while Bristol & West’s percentage decreases. At the end of the term Bristol & West will transfer the title deeds of the property into your name.
Here’s how the process works:
Step 1 - You make an initial payment to Bristol & West of at least 10% of the property value. You sign two contracts, the Diminishing Musharaka contract and the Ijara contract. You promise to purchase the remaining 90% of the property over an agreed period and you agree to pay rent to Britol & West.
Step 2 - Bristol & West contributes up to 90% of the property value and buys the property on your behalf.
Step 3 - The property is then transferred to you from the seller.
Step 4 - The property deeds are transferred to Bristol & West.
Step 5 - When you have purchased the property completely, the property deeds are transferred to you.
Who provides the money for my home finance?
Lloyds TSB has teamed up with ABC International Bank (ABC) and Bristol & West plc to offer you alburaq – Islamic Home Finance. This partnership means you’ll have home finance that’s Shariah approved - as well as a great team working for you.
You’ll get personal service from our home finance consultants while ABC International Bank and Bristol & West will provide all the technical expertise and support, plus the home finance itself.
How can you calculate my monthly payments using the LIBOR rate? This seems like interest under another name. Is this allowed?
We need to work out the amount of rent that’s reasonable to charge you in a consistent way. Our Scholars and the Scholars for Arab Banking Corporation have permitted the use of LIBOR as the basis for calculating rent. LIBOR is a benchmark that is well known. That’s why we use this rate to work out the amount of rent to charge you. The LIBOR is only a benchmark - something that we refer to. You are paying rent under a lease (Ijara) agreement. It also allows us to show you your rent compared with a conventional interest-bearing mortgage.
What do you do if something happens to me and I can’t make payments?
If your financial circumstances change for any reason and you are unable to meet your monthly payment, you should contact Bristol & West as soon as possible.
Bristol & West look at all the circumstances and will act fairly and reasonably. They’ll try and reach the best possible outcome for everyone. They may consider adding new names to the contract but you must remember that your home is at risk if rental payments are not maintained.
We don’t offer life cover or income protection at this time because we don’t believe there are any Shariah approved alternatives available. We understand that non Shariah approved life cover or income protection is your own personal choice. With Islamic Home Finance and our Islamic account, we are working on other Shariah approved financial services to help you in the future.
Under certain circumstances the State will pay the interest on a standard interest-based mortgage if a customer becomes unemployed. Since interest is not payable it is uncertain what the State's response will be to Islamic Home Finance. The matter is being looked at by the Government at the moment and we are working with them to look after your needs. But you should be aware, at this time, that you may not be able to access the same level of State support that is currently available for conventional mortgages.
I want to sell my property. Will you benefit from any increase in the value?
At the heart of Islamic finance is the principle of risk sharing. You and Bristol & West share the risk of your property appreciating or depreciating over time. But they don’t benefit from any increase in your property’s value if you want to sell it. They only receive the balance of the Acquisition Cost. Any appreciation or depreciation in value will be passed on to you on completion of the sale.
If during the payment term you wish to sell your house, you should contact Bristol & West. Under Diminishing Musharaka you have the right to ask them to transfer the property to a third party. However, you must ensure that the selling price is sufficient for Bristol & West to receive the remainder of the Acquisition Cost from the sale of the proceeds. All sums must be paid to them before the property is transferred to the new owner. A settlement fee is payable for administrating the account and releasing the deeds to the new owner.
Can I buy my council property through the Government’s right-to-buy scheme?
At present it is not possible to buy your council property at a discount with an Islamic Home Finance product. The matter is being looked at by the Government at the moment and we are working with them to help look after your needs.
Do you have any other Islamic financial services?
Our Islamic account enables you to manage your money in accordance with Shariah. There is no minimum balance required and you have 24/7 access to your account through Lloyds TSB Cashpoints, Internet banking and telephone banking. Find out more about our Islamic account.
Who decided that Islamic Home Finance is Shariah approved?
We are working with a committee of distinguished scholars. Our Shariah committee consists of four scholars:
Sheikh Nizam Yaquby is regarded as one of the main authorities on Islamic finance across the world. He is based in Bahrain and advises several other banks around the world.
Dr Muhammed Imran Ashraf Usmani is well known in the UK Muslim community. He is highly qualified and lectures in Islamic law in Karachi.
Mufti Abdul Kadir Barkatullah is the Imam at the North London Finchley Mosque. He has built up a reputation amonst Muslims in the UK for his teachings. You may have seen him on UK Islamic television discussing Islamic finance.
Muhammed Nurullah Shikder is a Barrister-at-Law. He advises individuals and businesses on Islamic Finance.
