Islamic FinancePersonal Finance

Is a Mortgage Haram? A Fatwa Analysis – Sh. Atabek / Sh. Haitham

Many Muslims have started using Islamic mortgages in the UK (you can compare between them really easily here). But as we all know, many Muslims continue to use conventional mortgages despite the prohibition on interest in Islam. Some of these Muslims argue that in fact conventional mortgages are halal.

They use two arguments.

Camp A argues that, while a conventional mortgage is usually haram, taking out a conventional mortgage is a necessity today. They also say that halal mortgages are not really halal. So, by default, a conventional mortgage is allowed.

Camp B argues that conventional mortgages are halal because they’re not truly “riba” or a “debt” in Islamic law.

We disagree with both Camp A and Camp B. Here are our reasons why.

Camp A: taking out a mortgage is a necessity

Camp A includes several very respectable scholars. At IFG we respectfully disagree with these scholars and our detailed views are set out in an earlier article.

In summary, one of the key reasons why Camp A thinks taking a conventional mortgage is permissible is because they think that halal mortgages are not really Islamic. So the only basis to buy a mortgage is if there’s a need, and finding whichever one is cheapest.

We of course think Islamic mortgages are Islamic and share our reasons here. If you agree with us then obviously going for a halal mortgage over a conventional mortgage makes complete sense.

The second key reason used by Camp A, is that there is a necessity to own a home. We disagree as the threshold for “necessity” in Islam is really high. Think destitute and homeless kind of necessity. And given that most people can quite effectively rent, this is not an argument that works.

We are not alone in our view that using the argument of “necessity” only works for the most extreme of cases.

Shaykh Haitham Al-Haddad has a great summary on this.

IslamQA also unsurprisingly considers conventional mortgage as haram.

Mufti Muhammad ibn Adam also takes the same stance here.

Camp B: Those who say conventional mortgages are halal

There are considerably fewer scholars in this camp. The most prominent among them in recent years from the UK is Shaykh Atabek Shukurov. He argues here and here that conventional mortgages should not be understood as the classic riba-based debt in Islamic law.

We respectfully disagree.

Sh. Atabek’s argument in a nutshell is:

  1. Forget the terminology being used (e.g. “interest” and “bank”) and focus just on the actual steps that take place.
  2. The bank isn’t just giving you money for you to spend as you wish. It is paying you money for you to only buy a particular property.
  3. What is actually taking place is that the bank is appointing you as its agent to buy the property on its behalf, which it is then selling to you at a marked-up price over the course of the next 2 decades.
  4. This is permissible as its just a murabaha (a murabaha contract is explained in detail here).

But this argument doesn’t work for the following reasons:

1. The conventional Bank isn’t ever looking to buy the property

Even if we focus on the actual steps being taken, the bank isn’t appointing the debtor to buy a house for it. The bank doesn’t particularly care about the house itself. It only cares that the house has enough value to act as good security for the loan it is about to give out.To put it another way: there’s a big difference between ordering a valuation report and undertaking a full survey and in-person visit with a view to buying it to actually use.

2. Misunderstanding the banking world

The analysis also completely mischaracterises the banking world, which is really big on securing a debt with an asset and/or guarantee. You see, a secured loan is pretty appealing and can easily be repackaged up and sold to other banks. But no one in this transaction really cares about the asset securing the loan – other than that it exists. And it is precisely because of this lack of care into the asset that we had the credit crunch).

So the banking world is not in the business of buying assets. It is in the business of financing projects and assets and making sure the loan is backed up by some form of safety for itself in case of default. That usually means either foreclosing on the valuable security that it has been granted or going after the debtor for the money (or both).

3. The implications are untenable

Taken to the extreme, this argument becomes completely untenable, as it would entail that only unsecured borrowing would really be impermissible. So all a bank has to do to make its finance sharia-compliant is to specify what the debt can be used for and get security. But here’s the thing – many bank loans already do this! Banks don’t like to give someone a large amount of money without having at least some control or visibility over what its money is being spent on. Under this line of analysis then, any leveraged buyout or purchase would suddenly become halal. So car finance is fine on a specific car. A leveraged private equity buyout of a company is fine too. Credit card debt isn’t though.

4. There is no agency agreement

While Sh. Atabek argues that we should look at the substance of the transaction, it must be noted that there is no agency agreement in place between the bank and the debtor at any point. That is because the relationship is one of creditor-debtor.

5. Whose name is actually on the property?

In the Al Rayan Islamic mortgage for example, the freehold of the property is in the name of Al Rayan. In the conventional mortgage the freehold is in the name of the debtor from start to finish. At no point does the conventional bank take ownership over the asset and sell onwards.

6. How does the accountant treat the mortgage?

Well, the accountant treats the mortgage as a debt. At no point does the property itself come onto the balance sheet of the bank.

7. Common sense analysis

The biggest reason for us is that simply on a common-sense analysis basis, everyone would conclude that a conventional mortgage is an interest-bearing loan. The banks think it is interest, the consumers think it is interest, and it is treated as interest by the accountants, HMRC and regulators. Sometimes it’s best to take things at face value.

Conclusions: conventional mortgages are haram

So there you have it folks. Conventional mortgages are haram.

You can’t justify getting a conventional mortgage by saying “it is a necessity for me to buy a house and the only way I can do that cheaply is a conventional mortgage”. You can’t do that for two reasons: (1) because its not really a necessity; and (2) you can always go for an Islamic mortgage instead.

Secondly, you can’t justify getting a conventional mortgage by arguing that it is essentially just like a murabaha transaction. This mischaracterises conventional finance and would open the floodgates to basically rendering large swathes of conventional finance as halal.

So Islamic mortgages are the way to go in our view. We’ve created the UK’s first comparison tool to help you compare between Islamic mortgages available today. Let us know how you get on in the comment below!

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  • Salam alaykoum brother
    You talk about islamic mortgage?
    Al rayan is the ex islamic bank of Britain which is a subsidiary of Lloyd’s bank is it not?

    Reply
  • Asslam o Alaikum, Nice article Mashallah. Many muslims in UK don’t understand the word necessity.

    Sh. Haitham also thinks that HPP model (Al Ryan & GateHouse) in UK is not halal either.

    Allah knows best.

    Jazak Allah

    Reply
  • Thank you for this, it’s so clearly articulated and makes the arguement conclusive. However our issue has been trying to get UK mortgages as expats. We haven’t found any Islamic options willing to lend to those not within the country even though the mortgaged premises is our primary UK address?

    Reply
  • The risk with Islamic banks is that it can close down, hence people go for conventional mortgages. What do you say?

    Reply
    • I don’t think that’s fair – Islamic banks have shown they last for a while. Conventional banks also are allowed to engage in the (haram) risky behaviour which leads banks to collapse, so there’s a degree of protection Islamic banks get simply because of the restrictions on them.

      Reply
  • Much respect to you for writing this article. I was stuck in the islamic mortgage mess via, ironically, a bank name LaRiba (run by Bank of Whittier in California). It is nothing but a heaping pile of lies and hypocrisy. I paid, to the last penny, the same exact amount interest compared to if I would have financed through a non-Islamic bank. Please keep at it Brother Ibrahim, this problem is rampant throughout the entire world because it is a money maker for banks. Allah SWT will reward you iA for your work.

    Reply
  • First of all Jazakumullahu Khair for all of your efforts in this field. Perhaps it has been mentioned in previous articles but I think Islamic finance goes well beyond simply halal vs haraam.

    I used to be a firm believer in renting only and avoiding any type of mortgage. However since I am now married, and the rental market becoming more difficult I have had to force myself to look again into buying a house in order to provide some stability in the home, instead of continuously looking to move every time the rent goes up.

    For me there is no need to go into details, a conventional mortgage is haraam. Anybody who argues otherwise needs to have a deep look inside their heart and realise that there arguments are satanic in nature.

    With Islamic mortgages things are slightly different. I used to believe that they were the same. In the end you are paying more for the house than it is worth, just like a conventional mortgage. However having dug a little deeper and read some of your articles, the conclusion for me is clear, if you want to buy your own home then the Islamic mortgage is really the only option.

    There are aspects to the system I don’t like, but ultimately it provides a decent halal alternative to a clearly haraam option.

    The biggest issue however for me is the lack of adoption by Muslims. If we are not going to support the Islamic Banking system then who will? Which non-muslim is going to pay more for a system that doesn’t conflict with their beliefs? It’s up to us as Muslims to make sure that we support it now, even if that means we pay more and have to deal with a little bit more pain now, so that our future generations will in sha Allah have a better system to rely on than we do at this time.

    If you are reading this, please consider the Islamic Banking system and look to replace all other conventional banking products with Islamic ones. Even if it means moving your current account and keeping your savings in an Islamic system. At the very least the Islamic system will begin to prosper. Know that for every penny we keep in high street banks, it is being used to continuously spread the cancer that is Riba as well as supporting industries that go against our beliefs.

    Rant over 😀

    Reply
  • In Ireland, there is still no islamic banks. So either keep paying high rent (exact same as the mortgage instalment) or get mortgage. Would this be taken as necessity to bring 1 of the essential needs of the family and avoid losing money to the landlord

    Reply
    • Probably best get a fatwa from a local scholar – but yes could be.

      Reply
      • Asslamualikum, Same here in Estonia. No Islamic banking even its not easy to get home loan from conventional bank as well as an expat but after living here 2 years some banks are offering now. On the other hand, owners are not easily renting to us with baby at least new buildings owners are not interested most of the time. That’s why I decided to buy an apartment but it’s not possible without home loan.I have an intention to clear out loan ASAP…should I go for home loan? I know it’s an excuse about necessity but a scholar said I can go for it by the reason of not getting rent with baby. Here, 3 room apartment rent is like 600 EUR and nothing is mine, last owner said he does not like toddler so I have to leave if I have a new born baby. If I get loan, monthly instalment would be 400-450 EUR and something will be mine.

        Reply
  • Assalam Alaykum Bothers & Sisters,
    How can I explain to a member of my family that conventional banks are investing in HARAM activities by using evidences, rather than only explaining to him what the concepts of haram vs.halal mortgages are. Indeed, he argues that Nationwide is a ethical bank and this is fine to get a mortgage from them.
    Jazakallah. Mickael

    Reply
    • salaam Mickael – point him to this website 🙂

      But really simply – Nationwide engages in lending out money to people and makes a profit from interest. That is haram.

      Reply
  • Assalamu-Alaikum,

    I must say that after 3 years of looking and reading I’ve found this website to be the most resourceful and informative.

    I am all for promoting Islamic Banks. I have an current account and savings account with them. However my predicament is this.

    My wife has Right to Buy on the council flat that we live in. I have approached all the islamic banks for a Halal Mortgage but they have all refused.

    I don’t even mind paying more in the long run as long as the mortgage is Halal.

    Al Rayan, GateHouse, UBLUK and Ahli…. None of them provide halal home finance for right to buy properties.

    So in this situation what are my choices ? If HALAL mortgages is not available for me.

    Is a conventional mortgage permissible for me ?

    I hope you can help me find a halal solution as we’ve been struggling for the last 3 years to raise a deposit amount and further funds for the shortfall and now discover that none of the HALAL BANK can provide a mortgage for us.

    Hope to hear from you soon.

    Jazakallah Khair

    Reply
    • You have looked at other halal alternatives regarding the purchase of this council property. But have you considered buying another property whether it is inside or outside of London using a halal mortgage?

      Taking a haram mortgage just because the council property will be cheaper is not a valid excuse. A simple analogy would be food. Usually haram meat is cheaper than Halal one. It does not mean it is permissible to buy the haram one. And if someone could not afford to buy halal meat, it still does not mean he is automatically allowed to buy the haram one, as he has other halal alternatives available such as buying vegetables and grains etc.

      All halal options must be closed before we can assess whether it is permissible to take out a conventional mortgage.

      (excerpt from recent Mufti exchange on this point).

      Reply
  • Mohammed Islam
    December 9, 2019 6:14 pm

    Assalamu-Alaikum brother Ibrahim Khan,

    Jazakallah khair for your reply.

    I have to clarify that I do not intend to participate in any HARAM transactions and do whole heartedly want to take out a HALAL mortgage. Even if it costs me more.

    I have never taken out any interest based loans and do not intend to start now.

    In that respect I am vigorously searching for and looking at ALL OPTIONS that are HALAL and available to me.

    I’ve read most of the articles on your website and have even looked at the opinions of Shaikh Haitham and Shaikh Atabek.

    I have also briefly read through the articles of the “Fiqh Council of North America” and the “European Fatwa Council”

    I have also considered buying other properties outside london with the HALAL mortgages available but none of these properties fall within my affordability criteria.

    It isn’t simply a matter of the council property being cheaper,(although it is a major criteria), other important aspects also include location, amenities, mosques and community, schools, work and family etc….

    In the case of my wifes council flat, it is only the fact that the Right to Buy discount has been made available (100k) that gives us the opportunity to even think about buying it. We intend to LIVE in this flat for now as it is our home, convenient for us and is local to our family and work, but intend to sell it or use it to move to a better accommodation in the future.

    Of course i can move to Glasgow and buy a house for £15,000 without interest but I’m sure you’re not suggesting that I uproot my wife away from our jobs and family and move to a location that is potentially unsafe, jobless and without future prospects and where we are no longer close enough to be able to take care of the affairs of our elderly parents. (I manage all my fathers affairs)

    I have exhausted all HALAL MORTGAGE options and can’t see any other HALAL alternatives available for me.

    I have tried Al Rayan Bank again but have been refused a HALAL mortgage as they wont finance a council property on Right to Buy. I’ve had the same response from Ahli, UBLUK and GateHouse.

    Are you able to suggest an islamic financial advisor or a Mufti that i can contact or present my case and circumstances to and get an appropriate way forward or a solution.

    Better still can you advise me on a HALAL lender that accepts Right to Buy or perhaps discuss my options with your contacts at Al Rayan and see if there is a way forward for me.

    I’m glad that there are HALAL mortgages (or close to HALAL) options available for most but like me there are still a lot of people out there with Right to Buy properties but no HALAL Mortgages options.

    It seems for now at least that a conventional mortgage route makes my life a lot more easier and affordable and removes me from a lot of hardship whereas the HALAL options are non-existent for me.

    I’m really glad to have discovered this site as i have learnt a lot. I pray that this site continues to remain an excellent source of information for all those looking to deal in HALAL finance.

    I look forward to hearing from you soon brother Ibrahim Khan.

    Jazakallah Khair. (Mohammed Islam)

    Reply
    • Salaam Mohammed – I have deep sympathies for you – my personal inclination in your situation would be to (a) either move out of London though I know that’s difficult; or (b) if moving out of London is really really not possible, then get a conventional mortgage.

      But you should actually get a fatwa on this – Sh. Haitham Al Haddad or Sh. Suhaib Hassan might be good people to go to.

      Reply
    • Syed Mujtaba
      March 7, 2021 1:28 am

      Salaam. I am going through the same situation however it’s not Islamic Bank who refuses finance for rtb but council rules that only person who lived in the property for certain time is entitled to be the owner. As in Islamic finance bank has share in property and by law bank has no right to buy. Even if someone lend you money to buy, he will have to submit an affidavit that he has no interest in property. By the way have you reached to some conclusion as this post is quite old.

      Reply
  • السلام عليكم ورحمة الله وبركاته
    May Allah reward you both and those who’ve helped you compile all the useful information across this site.

    I want to mention a few issues which I’ve noticed with regards to the argument of those who prefer to rent regardless (myself included) of “Islamic” mortgages being available or not. I’ve noticed that all the rental contracts that I’ve signed across the years have a clause stating that any late payments will be subjected to x amount of interest as per the Bank of England etc… check any short term tenancy agreement and you’ll see the exact wording.

    Now you may never be late on payment; however, as a hadeeth mentions, whoever witnesses a contract that contains riba is cursed. In this case, there’s always a problem whether renting or not, unless the contract can (and should) be changed. Maybe with Muslim landlords, but non Muslims and especially agents, I imagine this will be difficult to do.

    Have you or anyone else heard this being mentioned to a scholar on this subject?

    At this point, I’m favouring an “Islamic” mortgage, as it seems to be the lesser of evils. However, I’m confused about the criticism from the Shaykhs who are sceptical about Al rayan and others. Have the likes of Shaykh Haitham concluded that Ar Rayan and others are leading us to hidden riba mortgages or is it just other violations of Islamic fiqh that aren’t on the same scale as riba?

    If they are void of riba, then in the current state of Muslim affairs in the UK, especially with rental contracts including riba clauses, it seems better that we should use these Islamic banks and help them to survive. The hope as well is that these Banks will improve “Islamically”, by correcting the issues mentioned in the various criticism.

    What would you guys say about this? I’d like to hear your thoughts. (BTW I’m not asking for a fatwa)

    جزاك لله خيرا

    Hakim

    Reply
    • It’s all harram from the research I have done. Most of these people who are promoting Islamic mortgages are confused.

      Reply
  • Mohammed Islam
    January 16, 2020 11:55 am

    Assalamu-Alaikum brother Ibrahim Khan,

    I pray that this NEW YEAR is going really well for you. Jazakallah khair for your advice. I really appreciate it.

    I have been trying but have been unable to make an appointment to meet Sheikh Haitham.

    Just wondering if you could advise on whether any of the following 2 processes will be halal in my case.

    Option 1 : Take out a conventional mortgage on a fixed 5 year term and then pay off the debt entirely within the 5 years.

    Option 2 : Take out a conventional mortgage on a fixed 5 year term and then transfer to one of the Halal mortgages (gatehouse or Al Rayan) within the 5 year term.

    In both cases the rate is fixed so will this be HALAL for the 5 years atleast ?

    Are there any other options ?

    Thanks again for your help. Look forward to hearing from you soon.

    Mohammed

    Reply
  • Assalamu-Alaikum,

    I have tried to get a mortgage from Al-rayan, but their criteria seems to be for the rich, they say they do 80,95 FTV etc but when I present my situation , they say if you can pay like 40 % upfront it will be okay. and I keep asking myself how do I want to get that.
    Also the straw that that broke me was when I realized they do not do help to buy (Government scheme) because they are not protected. So all this support Islamic bank stories by people is good to hear, I think they are here to protect themselves and not Muslims, and I feel they should stop presenting themselves like they are here to help, but they should present themselves like a company offering services that could help Muslims, because If they do and want more Muslims on the ladder I would have though they will do the government scheme.

    so for me, I look at my situation as needing a conventional mortgage, I have analysed my situation deeply and Allah knows my intentions and my strengths and we all pray Allah guide us right.

    I believe things will get better for the generations coming after, as more and more people are looking into the situations and innovations and idea will break the cycle but I do not believe it will come from this banks (they are only looking out for themselves) but rather a genuine group of Muslims with innovative ideas.

    Reply
  • Fareed Rafiq
    April 5, 2020 10:29 am

    Love the website brothers. A much needed source of knowledge. May Allah swt reward you all. Are there any halal mortgage options for shared ownership?

    Reply
  • Islamic banks are doing the same thing but have made it seem like mortgages are halal. Mortgages are harram. I don’t get why people are trying to justify it.

    Reply
  • Assalaam alaikum. Are there any musharakah only or murabahah only mortgages available in the UK?

    Am I right in saying that of the 3 methods, ijara has the most opponents? I think islamqa seems ijara to be haram.

    Reply
  • I have read through your articles but i am quite confused about a couple of aspects-
    I have been in touch with Al-Rayyan, UBL & Ahli banks last year but none of them were able to provide satisfactory answers to my questions-
    I was left wondering how could they call it Islamic Mortgage then;
    The most basic reasons of conventional mortgage to be haraam is ‘Interest’ (Riba)
    However, Al-Rayyan, UBL, Ahli also charge – Bank of England’s APR rate which is to be payable by the buyer. Then how could it be Halal Mortgage when you still have to pay interest-
    It’s all under fine print of the contracts provided by Al-Rayan, UBL & Ahli Banks.
    They don’t tell you until you read it yourself & ask them to justify it.
    Brother Haven’t you pointed this?
    Thanking you in anticipation

    Reply
  • Taken from Al-Rayan’s home purchase plan; “After this period, the rate will revert to the Al Rayan Bank Variable Rental Rate, which is fixed to a specific percentage above the Bank of England base rate.”
    How would you justify it as Islamic mortgage when buyer has to pay variable rental rate which is above bank of england’s base rate- in other words it is simply interest.

    Reply
  • Raja Rashid
    May 22, 2020 5:44 am

    I still don’t get what the difference is you are actually paying more for a Islamic mortgage,, in both cases you are paying money whether you call it rent payment’s or mortgage payments,,you are recommending to rent but it is much dearer to rent and you have no security if the landlord kicks you out and you cannot then you need to start again and what about your children will they rent all there life as well,,, I believe you can deal with banks if it makes your and your familys life easier.

    Reply
  • I’m no expert on finance but here is the dilemma:

    Put aside the arguments based on similarities and differences of conventional versus Islamic mortgages. Answer this question:

    What do you use to buy the house whether a conventional mortgage or Islamic mortgages? The answer is currency such as pounds and dollars.

    Then ask yourself and what is currency and where does it come from? The answer is it’s a made up concept. It comes from nothing and backed by notning. You don’t even have to print it anymore. It’s just a number backed by absolutely NOTHING! That is the definition of an un-Islamic financial instrument. Use it however you see fit but it will not make a currency halal.

    Unless you buy with gold and silver and exchange for some other good all currency related, trade, exchange and banking transactions today are haram in accordance with Islam.

    Reply
  • Asalamu walaykum,

    I am here for some advice.

    I am a young male who recently got married and is looking to buy a house, not because of choice but because of a need. I currently live with my parents in a council house where I am adequately housed according to the council. So therefore I cannot even apply to get on social housing as I don’t get any priority. Worst of all the house is under my mum and dads name so if they were to pass on, I will be asked to leave the property and as me and my wife work they will not offer social housing and would rather tell us to rent privately. This has already happened to a few families on my road.

    The dilemma with renting privately is that I live in London and rent is ridiculously expensive and even if I rent privately there is no security on the tenancy. Landlord have the power to give you notice to leave without any grounds, so I could be asked to leave a property in 30 days and I wont even be able to appeal or go to court to challenge this. (I work as an adviser so I have significant knowledge of housing). Private renting simply has no stability, and living without stability especially when I have children is not something I want to deal with.

    another dilemma is that Islamic banks are extremely expensive I compared the same rate with conventional mortgage and if I opt to go with Islamic mortgage I will be paying nearly £800 extra a month. To my knowledge Islamic banks are not there to help us Muslims, like any bank they care about their own profit. Also Islamic banks home purchase plan means you go into contract as joint owners where you pay ‘rent’ for occupying their half of the property, which makes total sense but when it comes to legal cost like stamp duty etc are they not meant to pay their share of the expense? They don’t. Or if the house needs repair etc they have no responsibility to pay for the repair, so how is this arrangement fair? If we are getting into joint ownership the costs should surely be shared however The full costs falls on the buyer.

    I feel like I have no choice but to look into conventional mortgage where I know that I will have a roof over my head which is both stable and affordable, where I don’t have to be in constant worry that one day my family will end up in the streets. I feel like I have no choice but to enter conventional mortgage, I am aware this is haram but how does someone like me come to alternative solution.

    I have spoken to my family who are rightly advising me not to get into conventional mortgages but they themselves have cheated, lied and frauded the system to get social housing and at the same time are still cheating the system by lying about their income while claiming benefits and living comfortable lives rent free while making good money behind closed doors.isn’t this something that’s haram? Does not this make your income haram? People are easy to make judgements while sinning themselves and then giving out fatwas on riba.

    Please can I get some advice?

    I myself have been in a predicament around Islamic mortgages and conventional mortgages. people are easy to say go rent as it is halal, but little do they know in London rent is ridiculously expensive and unaffordable

    Reply
  • Salaam,

    I live in the Netherlands. There are no islamic Banks here, so no halaal mortgages. I currently rent a flat for 600€ (mortgage installment would be 250€). So renting here is considerably higher than buying.
    Also the waiting lists for renting are insane, it could take 10 years to get a decent house to raise a family in.

    So for someone who is planning on getting married and having kids, but currently lives in a tiny flat I have zero chance of getting a decent rental in the next 5-10 years.
    Is it than a necessity to take out a conventional mortgage (with fixer rate)?

    Reply
  • https://youtu.be/8mZrAFAjU6A discussion between Ar rayan rep and another brother. Please watch. The brother on the right had some good points e.g. multiple contacts into one and no risk for the banks.

    Reply
  • I was looking into buying a property using the lslamic mortgage option, because l thought this was the halal way, but to my personnel understanding in lslam, it is said when you give a loan to someone, you should not expect an increased amount back, as that is interest, but if l a person wants to give you more then the borrowed amount back, out of his own good will, for example he profited quite well from the money he borrowed and is happy to give you a bit extra back, this is permissible.

    The thing is if you borrowed £100,000 and you have to pay back £130,000 you know were you stand, but the thing is with an lslamic mortgage or any other mortgage the monthly payments can change after the fixed term is over, so you don’t know what you will be paying back in total to the bank in the end.
    I believe the lslamic banks are trying to make a mortgage that is halal, but the question you have to really as your self, is it really halal, or are they trying to make something halal that is not halal.
    you can ask a lot of different mufti about this and you will get a lot of different ansers.
    All l can say is that, may Allah make it easier for all the brothers and sisters in this very difficult situation, and may Allah guide us to the right path ameen

    Reply
  • M. Abdullah Idris
    November 2, 2020 4:22 pm

    How can you have islamic banking system when debt is way of creating money in modern banking system? Islamic banks are also creating money by loaning it. In Islamic system, could any private institute be allowed to create money out of thin air and charge rent/cost of capital on it? Below is white paper from BOE which states that bank create money by loaning.

    https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

    Reply
  • Salam alykum,
    A house will increase in price over time such that once the mortgage is paid off the buyer of the house will have more money in terms of assets then they paid the bank in interest over the course of the mortgage. So it feels more just than renting a property where your money is completely lost, and when you die you have no wealth in a property to leave your children (if I rented how would I ever have enough money to save for a property). If every law in Islam has a morality reasoning behind it, and riba is haram as it takes advantage of a person financially would renting not be the more haram then buying a house with a mortgage?

    Reply
  • Above analysis is not clear and not supported with sound arguments. I think this fataw make more sound than your analysis:

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

    It would not be permissible to take out a loan on interest for the purchase of a house unless one is in a situation of dire and extreme need. The necessity (dharura) you have referred to is when one is in a situation of dire need and is exposed to perishing or sleeping on the streets.

    Shaykh Muhammad Sa’id Ramadhan al-Bouti (Allah preserve him) of Damascus (Syria) states:
    “The necessity which allows usurious loans is the same necessity which allows eating the meat of a dead animal, pig and the like, in which case the one necessitated is exposed to perish from hunger, nakedness or losing lodging. Such is the necessity, which makes prohibitions lawful.”

    Thus, it will not be lawful to take loans on interest in normal situations. One should actively look towards other means of obtaining some help. If it is impossible to obtain an interest-free loan from family and friends, then one should reside in a rented house.

    As far as third party car insurance is concerned, scholars permit it due to it being mandatory by law. In order for one to drive a car, it is necessary by law to have an insurance policy. One does not have to (by law) obtain a house on mortgage, thus the distinction between the two situations is apparent.

    And Allah knows best

    [Mufti] Muhammad ibn Adam
    Darul Iftaa
    Leicester , UK

    https://islamqa.org/hanafi/daruliftaa/7823

    Reply
  • Dear Ibrahim,

    Thank you for sharing this article. Your analysis is rigorous and well structured.

    However, what do you say about the argument that:

    1 – Whenever riba is mentioned in the Quran, it prohibits the eating/consuming/taking/enjoyment of usury. It does not necessarily prohibit the paying of riba. (See Dr Shabbir Ally’s video on this: https://www.youtube.com/watch?v=feCrf4X-2y4)

    2 – When taking out a mortgage – the debtor simply pays the riba but does not themself enjoy/consume/take/enjoy the riba.

    3 – Therefore, and bearing in mind that the western banking system is based on riba, surely the debtor is not blameworthy for taking a mortgage, as they do not enjoy/consume/take/enjoy any interest, rather they are forced to pay it, by result of living in a country with such a banking system.

    I would be really interested to hear your analysis/thoughts on this.

    Thank you.

    Keep up the great work inshallah and may Allah continue to bless your endeavours!!

    Reply
  • Assalamu Alaykum brother. I read your points and they are completely vague. I.e.point 6 bank doesn’t recognise properties in their balance sheet is complete lie. They recognise them in their balance sheet “Assets” under “Advances secured on residential properties” and they are more than half of the assets by value for example 82bn out 125bn of total assets in Halifax’s 1998 Annual reports and accounts. So, lying proves that you are not qualified to argue in this debate.

    Reply
  • Assalamu Alaykum brother. I read your points and they are vague points even lies. I.e. point 6 – bank doesn’t recognise properties as an asset in their balance sheet. Have you had experience in banking or are you qualified accountant? Banks do actually recognise mortgages as an asset in their balance sheet under “advances secured on residential properties” and more than half of their assets are mortgages. Look at Halifax Annual reports which is publicly available online. So liying proves that you are not qualified in this subject. Why you are not publishing this and responding?

    Reply
  • Assalamualaikum. Islamic banks will have to somehow get competitive and start offering mortgages with 5% and 10% deposit. It will take us years to save 20% deposit to afford Halal mortgage and house prices keep going up. So its a loop.
    A good campaign should be run to improve concept and visibility of Islamic banks In ShaaAllah. As it is currently it is of help only for ones who are able to save good lots of money.

    Are there any plans of 5% and 10% deposit for Halal mortgage?

    Reply
  • Salaam My Brothers and Sisters in Islam,

    I just wanted to give my humble 2 cent view on this topic.

    I contacted Al Rayan Bank recently and they require a 35% deposit to purchase a property under their shariah compliant mortgage. This is not affordable for me and I am currently renting hoping to get onto the property ladder in the near future insha Allah like many in the same boat.

    Although I would not consider the financial institutions regulated in the UK claiming to be 100 % Shariah Complaint.

    A claim which I feel is void of certain principles of risk sharing and re-possession of property in the event of not being able to make the monthly payments for example which I believe is not inline with business contracts & financial jurisprudence in Islam.

    However saying this what options or alternatives do we really have in the UK. If we want to follow the shariah then we do need to help our Muslim institutions operating in the UK who are trying to provide us with an alternative halal products as opposed to conventional banks.

    My advise would be to support and deposit our funds and savings into these shariah compliant banks instead of the conventional banks due to what conventional banks do with our deposits.

    They lend our deposits and savings to others and benefit from the interest they recieve and then give interest to the customers and purchase stock which could be from haram sources such as alchohol, gambling etc so from an ethical point of view this strategy makes sense. Even if we don’t agree with some elements of their shariah compliance.

    I think we should as Muslims support Islamic financial institutions in the West by opening our current (our salaries go into) or savings accounts with them.

    However due to the deposits and criteria by these Islamic institutions only a minority of Muslims will be able to afford these deposits to purchase a home from these institutions. This form of home ownership via these Islamic banks is not practical for the majority of Muslims living in the West.

    However we have to remember that banks are businesses they are here to make money weather they are run by Muslims or Non Muslims selling their products and services.

    In Muslim Majority Countries where most Muslims purchase land and build their own homes at a fraction of the cost of purchasing a home in the West. You can see the wisdom of living in Muslim countries and avoiding RIBA altogether as a more affordable option.

    But times have changed Muslims are now living in the West into their 2nd and 3rd generations and instead of living temporarily in the West for the purposes of giving dawah, travelling or trade in Non Muslim countries. They have decided to reside their permenantly which now has resulted in the need of buying a home instead.

    There seems to me 3 practical solutions given by the scholars/groups in relation to this:
    1. Rent via Council or private landlord in the West (never purchase a home)

    2. Follow the Fatwa of the European Fatwa Council for Muslims living in the West to purchase 1 house per family and meeting certain requirements.

    3. The Muslims that can afford the deposits and meet the criteria of institutions who are Shariah compliant purchase a home through that option.

    All 3 are viable options according to their affordability it is based on personal preference as they all have scholars backing them.

    It is up to the individual which group of scholars they wish to follow as all three are correct in my humble opinion.

    My last advice to those involved in this website is to set up meetings with these scholars and interview them instead of getting quotes from YouTube videos to clarify their position.

    To be able to let them explain their position in full the last thing we need to do is misquote and misinterpret one another’s views.

    This would also help to clarify all the referencing sources from the Quran, Sunnah, Ijmah, ijtihad fatwas of classical scholars and modern scholars who specialise in Islamic jurisprudence. Instead of just giving examples.

    May Allah guide us to the Truth and Help our Muslim Communities around the World to follow the straight path.

    Reply

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