HSBC Amanah finance product information

HSBC has provided the following information on their new product.

Purpose

The Amanah Home Finance product will allow customers to acquire a residential property without the risk of compromising their deeply held principles.

How it works

HSBC will purchase the property from the Vendor on the customer's behalf, and then lease it to them over an agreed term.

During this period the customer will make a monthly payment, which consists of a contribution toward the purchase price of the property and rental payments.

Plan Term

Minimum 7 years, maximum 30 years (or aged 70 with proof of income)

Deposit

Minimum 10% of the total value as down payment. This will vary based on the amount of financing required.

Minimum Home Finance Available

£25,000

Property Types

Freehold

Standard domestic residential property criteria. Excludes flats.

Leasehold

Acceptance for other leasehold property will depend upon any existing leasehold restrictions but as a minimum must adhere to the following:

Lease term min 50 years + term

Lease does not forbid sub-letting

Right to Buy cases will be accepted if written confirmation is obtained from Council.

Employment

Employed, self employed and retired (with proof of income)

Applicant Type & Max Advance

Sole applicant

Finance up to 70% = 3.5 x Gross Income
Finance 70% - 90% = 3.25 x Gross Income

Joint applicants

Finance up to 70% = 3.5 x Higher Income + 1.5 of lower or 2.5 x joint

Finance 70% - 90% = 3.25 x Higher Income + 1.25 lower or 2.5 x joint

Rent Review

6 monthly on 1 January & 1 July

Maximum applicants

Six

Minimum age of applicant

18 years

Maximum age at finance maturity

70 years with proof of income after retirement

Residential Status

UK and eligible foreign nationals who have appropriate residential status (verified at branch using standard account opening procedures).

Shariah (Islamic Law)

Shariah (Islamic law) prohibits the charging or payment of interest.

For devout Muslims it is difficult to participate in a range of financial products that most of us take for granted, from pensions and life insurance to credit cards and interest-bearing current accounts.

Investments in companies are allowed, but must avoid those involved in alcohol, tobacco, pornography and pork preparation.

Under Islamic law, Muslims are forbidden to take out conventional mortgage products or current accounts that charge interest.

Until now the only options for British Muslims have been to buy with cash, rent, or else put their religious beliefs aside and opt for a conventional mortgage.

The application process

The Amanah Home Finance product is based on the idea of a particular type of transaction in Islamic law.

The contracts will reflect the different steps of Ijarah financing, none of which involve interest:

As with traditional home buying, a customer picks a property he/she wants to buy and negotiates the price with the seller. Alternatively, he/she may wish to refinance their existing property.

Then the customer will apply to HSBC Bank for Amanah Home Finance, and HSBC will write back to confirm if the application has been successful.

The customer's solicitor or other legal advisor will be sent the legal documents, who will explain the details of the scheme.

If the customer wants to continue, he/she will be asked to sign an Amanah Home Finance letter. By doing so he /she will accept the finance.

The customer 's solicitor or other legal advisor will make sure the title of the property is acceptable and approve the contract for the property. If he/she is buying the property from someone else, then the contract to buy the property must be capable of being transferred to HSBC.

Contracts will be exchanged either with the seller or HSBC in case of a refinance. This will be a binding contract for the purchase of the property. A date will also be agreed when HSBC will become the owner of the property and lease it to the customer.

The customer will make a monthly Amanah Home Finance payment to HSBC (25th of every month). The payment comprises: rent, on-account payment and building insurance. The payment will be collected from the customer's bank account via Direct Debit.

HSBC's solicitor will register the bank's ownership of the property in its name and the customer's solicitor or other legal advisor will register the customer's ownership of tenancy in their name.