Buying house on mortgage

Fatwa ID: 02016

Answered by Ustaadha Bint Salih

Question:

Can we buy a house on mortgage in London? Does Islam allow it?

Answer:

Bismillah

Buying properties on mortgage is not permissible because of the involvement of interest.

O’ you who believe! Be afraid of Allah and give up what remains of interest if you are believers. And if you do not do it, then be ready for war with Allah and his Prophets.”(Surah Baqarah V. 278)

Jabir raḍyAllāhu 'anhu (may Allāh be pleased with him) reports that the Messenger of Allah ṣallallāhu 'alayhi wa sallam (peace and blessings of Allāh be upon him) cursed the acceptor of interest and it payer and the one who records it and its two witnesses and he said ‘they are all equal’.
(Sahih Muslim, Chapter about curse on the one who consumes interest and the one who pays it, Hadith 1598)

Therefore, one could derive that purchasing such properties on mortgages should be avoided.

The Islamic mortgage provides a permissible alternative to an interest based mortgage by allowing individuals to purchase their own homes without having to pay interest as Islam strictly prohibits the practice of receiving and paying interest.

Therefore, two types of mortgage have been developed which are compatible with the Quran or Hadith.

Briefly, they are Murabaha and Ijarah. Murabaha is where the bank buys the property at a set price and immediately sells it on to the client at a higher price. This is paid back in instalments and deemed to be a sales transaction and is similar to a fixed rate mortgage.

Ijarah is where the bank and the client both purchase the property and the client pays rent to the bank for its share and also payments in instalments towards the purchase of the house until the client pays the entire price of the banks share, and the rent paid in this period would be considered the bank’s profit.

For further clarification, you could refer to Mufti Taqi’sUsmaniSahebs book “An introduction to Islamic Finance” on pages 107- 109.

Only Allah knows best.

Written by Ustaadha Bint Salih

Checked and Approved by Mufti Mohammed Tosir Miah    

DarulIfta Birmingham

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