What is the ruling of the Help to Buy equity loan?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Help to Buy is a new government-backed initiative in the UK set up to help first time buyers and those looking to move up the property ladder, to purchase a property with as little as a 5% deposit.
With a deposit of 5%, the Help to Buy Equity Loan scheme allows one to borrow an additional 20% of the purchase price of the property from the government.
The borrower will not be charged ‘loan fees’ for the first 5 years of owning your home.
In the 6th year, the borrower is charged a fee of 1.75% of the loan’s value. After this, the fee will increase every year. The increase is worked out by using the Retail Prices Index plus 1%.
These loan fees are clear interest. Any conditional increase on a loan is interest and impermissible.
Therefore, it is not permissible to enter into the Help to Buy Equity Loan Scheme.
And Allah Ta’ālā Knows Best
Mufti Faraz Adam al-Mahmudi,