Islamic Banks and Mortgages

CategoriesTrade, Business & All Things Money [512]

Fatwa ID: 05724

 

Answered by: Mufti Muhammad Adnan

 

Question:

 

I am currently living in a 1 bed shared house with my wife and daughter, I need to move out soon and I am really stressed out about what to do next, as it is a lot cheaper to buy a house on the mortgage rather than to rent but I do not want anything to do with riba. I have done the research and understand Islamic banking options, Murabaha and Ijarah which is permissible. But many other scholars say not all Islamic banks are 100% halal.

 

So my question is which Islamic banks in the UK are 100% compliant with shariah for a mortgage? Or if there are any other options.

 

 

In the name of Allah, the Most Gracious, 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 & giving interest is counted as one of the greatest and heinous sins in Islam.

 

“The Holy Prophet (saw) has cursed the person who takes interest, who gives interest, who writes it and who witnesses it.” (Sahih Muslim)

 

The Holy Prophet (saw) has said:

“To take one dirham of interest knowingly is worse than committing adultery 36 times.” (Mishkaatul Masabeeh)

 

 “A person who involves himself in usury will be afflicted with 70 kinds of sins. The lightest in comparison with others is committing adultery with your own mother.” (Mishkaatul Masabeeh)

 

In the Holy Quran, Allah has said:

 

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

 

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

 

The ruling will still be the same even if a person is renting a house. It is compulsory if a person is married to provide shelter and accommodation for his wife, but it is not necessary to buy a house. Renting a property is sufficient. Furthermore, there are Islamic mortgages available which are a halal and lawful alternative to a conventional mortgage.

 

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 mortgages 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 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 bank 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 SahIbs book “An Introduction to Islamic Finance” on pages 107- 109.

 

 

Only Allah knows best

Written by Mufti Muhammad Adnan

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

 

 

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