Rent only Diminishing Musharakah
Our Rent Only Diminishing Musharakah product is an arrangement between the Bank and the applicant. Both the applicant and the bank will each contribute a percentage towards the purchase or refinance of a residential property. For example, the bank may contribute 75% and the applicant 25% of the purchase price (for refinances, the applicant’s contribution is the equity in the property).
The Bank will lease its share in the property to the applicant for the duration of the finance term.
Over the finance term, the applicant will make monthly payments to the Bank which will compromise of rent only. This means that during the term of the agreement, the applicant is not acquiring any shares of the property from the Bank and as a consequence the applicant’s share in the property during the term will remain the same. In addition, the applicant’s monthly payments will also be lower when compared to our Acquisition Diminishing Musharakah product.
To acquire the Bank’s share in the property, the applicant will either need to pay part lump sum installments prior to each rent review (this is not possible during a fixed term period) and/or make a full lump sum installment at any time or at the end of the agreed term.
Until the Bank’s share had been acquired by the applicant, the Bank will charge the applicant rent for the use of its share of the property. The rent is calculated according to the respective shares owned.
Following the applicant’s acquisition of all the Bank’s share, either at the end of the agreed term or upon early purchase of the Bank’s share of the property, whichever is earlier, the Bank will transfer the full ownership of the property to the applicant.
Our Rent Only Diminishing Musharakah product is higher risk than our Acquisition Diminishing Musharakah product as the monthly payments under the Rent Only structure only consist of rent, whereas under the Acquisition Diminishing Musharakah product the applicant’s monthly installment consists of both acquisition installments and rent payment.
It is the applicant’s responsibility to make sure that they put in place, maintain and regularly monitor, any financial arrangement that is expected to provide a lump sum sufficient to acquire the Bank’s share at the end of the agreed finance term.