The case in brief
- Client: Pakistani national and Qatar resident
- Property type: Buy-to-let purchase (Ethical mortgage)
- Property value: £750,000
- Loan Amount: £562,500
- LTV: 75%
Few brokers in the market are able to offer a strictly ethical lender to those looking to utilise Islamic finance in order to fund a property purchase. This can be further complicated when the borrower is not a UK national and is looking to purchase the property as a buy-to-let option.
The client
Our client was a Pakistani national with Qatari residence. As an employee of the Qatari government, our client had a high net worth and was looking to create a long term relationship with a broker in order to create an investment portfolio of properties in London.
Our client was very specific on purchasing Zone 2 London properties, which do not have the same high yields as other areas, and therefore did not pass the lenders stress test, which considered the potential yields from rental and the affordability to repay the loan. The client needed to harness their income in order to finance the project, using a tool called top slicing, which is essentially using the client’s own income to offset the modest yields they may acquire through renting the property.
Our solution
Working with a strictly ethical lender who offers competitive rates to non-UK residents, we were able to successfully use the client’s own income (top slicing) to negate the modest yields of the property portfolio they wished to build. We were able to negotiate a rent only diminishing mushakarah, which meant that over the finance term, our client would make monthly payments to the lender which comprised of rent only.
This meant that our client was only obliged to purchase the share at the end of the finance term, so the customer’s share in the property remained the same throughout the term. This method of financing also means that the customer can purchase the bank’s entire share and settle the debt at any time if they so wish. Once the customer’s share has been paid, they become the sole owner of the property.
Articus Finance worked closely with a specialist ethical lender in order to realise the client’s needs and to offer a competitive package for the client over the mortgage term to the value of £562,500.
Buy-to-let property in the UK, particularly if they are searching for an ethical lender. Articus Finance are experts in working with such cases. Learn more about our Islamic finance services.