Fatwa ID: 08494

Answered by Maulana Abdurrahman Mohammad

Question:

Riba was forbidden in Islam due to its exploitative nature, as it traps people in endless cycles of debt and financial hardship. In my current situation, I have a conventional mortgage with £125,000 remaining, and in October 2025, I will have the option to either refinance with an Islamic mortgage or continue with a lower-rate conventional option. However, the Islamic mortgage would actually cost me £40,000 more over the remaining term, making it significantly more expensive.

Given that Islamic finance is meant to prevent financial burden, would this not, in my case, be more exploitative and burdensome than a conventional mortgage? I would like to understand, in light of my specific circumstances, what the most advisable and Islamically sound approach would be.

In the name of Allah, the Most Gracious, the Most Merciful

Answer:

May Allah reward you for reaching out and grant you Tawfīq to make the right decision. Allah SWT is testing you to see what you will choose and has blessed you with the option of Islamic financing. Although it may not seem ideal and may be more expensive in the long run, it will keep you safe in the Ākhirah and protect you from sin. Allah SWT says in the Quran:

O believers! Fear Allah, and give up outstanding interest if you are ˹true˺ believers. If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm.

Interest is prohibited in Islam, and loans are to be given out interest-free. Islamic banks employ different strategies to give out “loans” where they may buy the house and sell it to you at a greater price or create a partnership where you and the bank both buy the house and you buy off the bank’s share over time and pay rent in place of interest. Regardless of the strategy used, as long as the contracts are Shariah-compliant, you should choose Islamic financing over conventional loans. If this particular option is too expensive, consult local Muftis and explore other Shariah-compliant banks and options. Allah SWT assigns us rulings based on His infinite wisdom and knowledge, and it is incorrect for us to apply our own understanding and go against His command. Due to the dangerous outcome of interest (waging war with Allah) and the option of Islamic financing, it would be impermissible to take out a conventional loan.

References:

[1] يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ ٱتَّقُوا۟ ٱللَّهَ وَذَرُوا۟ مَا بَقِىَ مِنَ ٱلرِّبَوٰٓا۟ إِن كُنتُم مُّؤْمِنِينَ ٢٧٨ فَإِن لَّمْ تَفْعَلُوا۟ فَأْذَنُوا۟ بِحَرْبٍۢ مِّنَ ٱللَّهِ وَرَسُولِهِۦ ۖ وَإِن تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَٰلِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ ٢٧٩

(Surah Al-Baqarah 2:278-279)

Only Allah (عَزَّ وَ جَلَّ) knows best.

Written by Maulana Abdurrahman Mohammad

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham