An alternative to a conventional mortgage
In the name of Allah, the most Beneficent, the most Merciful.
Answer
It should be borne in mind that buying properties on a mortgage is not permissible as it is interest related and taking and giving interest is counted as one of the greatest and heinous sins in Islam.
Allah Tala has declared war on those who do not give up taking interest.
“O you who believe! Be afraid of Allah and give up what remains from riba (interest) if you are believers. And if you do not do it, then be ready for war with Allah and his Prophet Sallallahu Alahi Wasalam. (Surah Baqarah v.228)
Therefore, one could derive that purchasing such properties on mortgages should be avoided. Similarly, the brothers who are planning to use the property as a mosque should look for alternative premises which have been bought with halal money.
With regards to your question an alternative to a conventional mortgage is an Islamic mortgage. An Islamic mortgage is an ethical mode of finance, which derives its principles from the Quran and the Hadith. It provides a permissible alternative to an interest based mortgage by allowing individuals to purchase their own homes without having to pay interest.
As such, two types of mortgage have 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’s Usmani Sahebs book “An introduction to Islamic Finance” on pages 107- 109.
Only Allah Knows Best
Mohammed Tosir Miah
Darul Ifta Birmingham.
