Expert discusses why Home Purchase Plans are not just for those following the Muslim faith
When the housing market is a little challenging, as it has been for much of the last year, it can pay to get creative, not only to find solutions for clients, but also for additional income streams.
Sticking with conventional routes and options may not be enough, which is why it is beneficial for brokers to have a wide range of funding products open to their clients.
So, how can Home Purchase Plans be a useful alternative to traditional mortgages?
Sakeeb Zaman (pictured), chief executive and co-founder from StrideUp, said brokers should strategically incorporate Home Purchase Plans into their toolkit, especially during periods of housing market challenges.
Amidst such uncertainties, he stated the importance of diversifying solutions for clients and exploring additional income streams becomes paramount.
“Relying solely on conventional routes may prove insufficient, underscoring the significance of Home Purchase Plans as a valuable alternative to traditional mortgages,” Zaman commented.
This particular approach, Zaman said, introduces a distinctive path to homeownership, as Home Purchase Plans involve buyers jointly acquiring a property with the plan provider.
“The buyer's initial stake, covered by their deposit, is complemented by the plan provider's ownership of the remaining portion,” he said.
Monthly payments, resembling rent, Zaman noted, contribute incrementally towards increasing the buyer's stake. Consequently, at the conclusion of the plan's term, he added that the buyer transitions into the sole property owner.
“While originally designed to align with the needs of those of Muslim faith, Home Purchase Plans prove versatile, extending their benefits to individuals regardless of religious beliefs,” he said.
The unique nature of Home Purchase Plans, Zaman stated, necessitates a specialised approach, and not all brokers can directly advise on them.
“The Financial Conduct Authority (FCA) mandates special permissions for brokers advising on such plans, making it a noteworthy selling point for intermediaries seeking to broaden their expertise,” he said.
This regulatory requirement, Zaman pointed out, assumes added importance considering the significant Muslim population in the UK, currently numbering nearly four million.
“Having the capability to support this demographic in securing home finance that aligns with their faith becomes not only a strategic advantage but also a socially responsible business practice,” he said.
Moreover, Zaman reasoned that forging partnerships with the right Home Purchase Plan providers opens new avenues for brokers.
“This collaboration allows brokers to expand their client base and secure a valuable income stream; even in cases where brokers lack the necessary regulatory permissions, collaboration with Home Purchase Plan providers remains feasible through a referral system,” he said.
In this arrangement, Zaman said the provider assumes responsibility for providing advice, and upon the completion of a case, the broker receives a proc fee.
Beyond diversifying income, he commented that this referral system establishes a client relationship, increasing the likelihood of the client returning to the broker for their future financial needs.
Choosing the right Home Purchase Plan provider, Zaman stated, goes beyond merely meeting faith-based requirements.
“Some providers address challenges that conventional lenders often struggle with; this includes situations where clients rely on gifted deposits from non-blood relatives or have complex income arrangements,” he said.
By brokers expanding their toolkit in collaboration with innovative providers, Zaman explained, advisers enhance their options.
“This allows them to cater to a broader range of clients and scenarios that may be overlooked or challenging for conventional mortgage lenders,” he added.
Have you advised any clients to consider Home Purchase Plans given market conditions? Let us know in the comment section below.
