In this piece
How the money movesWhat it costsFour questions before you signRegulation and stamp dutyWhat to do nextQuick answersComments- The bank buys part of the home, and you buy it back over time.
- You pay rent on the bank’s share, and it falls as yours grows.
- It isn’t automatically cheaper or dearer, so compare the whole cost.
People call them Islamic mortgages. The product isn’t a mortgage in the ordinary sense, and the difference is more than vocabulary. With a home purchase plan, the bank doesn’t lend you money at interest. It buys part of the property, and you pay to live in the part you don’t yet own.
How the money moves
- You put down a deposit, which becomes your share.
- The provider buys the rest.
- Each month you pay rent on the provider’s share and buy a little more of it.
- As your share grows, the rent falls.
- At the end, you own the lot.
Al Rayan Bank describes each payment as having an acquisition element and a rental element. You can move the numbers yourself with our ownership calculator.
What it costs
Don’t assume it’s cheaper, and don’t assume it’s dearer. Compare the initial rental rate, the follow-on rate, the application and product fees, and the charge for leaving early. On 12 November 2026, Gatehouse’s purchase plans for UK residents started from 5.88% on a five-year fix at 65% finance to value, with fees of £149 + £499.
Four questions before you sign
- What happens to the rate when the fixed period ends?
- Can I make extra payments, and is there a charge above an allowance?
- Who insures the building and who pays for repairs?
- What happens if I want to sell early, or if I fall behind?
Early payment terms are where the fine print lives. Al Rayan, for example, publishes an early settlement premium of 2% on amounts above an annual allowance for certain rates. Terms differ between providers and products.
Regulation and stamp duty
Home purchase plans for people living in the property are regulated by the FCA, and the law has rules so the structure doesn’t usually trigger stamp duty twice. Your conveyancer should confirm how those rules apply to your purchase.
What to do next
See who offers what, then speak to the provider or a broker who handles these plans. This article can’t tell you which plan suits you.
Quick answers
How it differs from a mortgage
The bank doesn’t lend you money at interest. It buys part of the property, and you pay rent on its share while buying it back.
How the cost compares
Don’t assume it’s cheaper or dearer. Compare the rates, the fees and the charge for leaving early.
Regulation
Home purchase plans for people living in the property are regulated by the FCA.
- Al Rayan Bank and Gatehouse Bank’s published product terms
If you spot a mistake, tell us and we’ll fix it.
Rates shown are for information and depend on your circumstances. Your home may be repossessed if you do not keep up payments on a home purchase plan. Some links may earn us a fee, which never changes the order.
