Can we take out a mortgage? It is both financially advantageous, and avoids a lot of immigration headaches for close relatives…We have an Islamic Housing Corporation here in Canada (IHCC), who offer interest free mortgages based on Ijarah. Is it permissible to enter in this type of contract?
ANSWER
In the name of Allah, Most Compassionate, Most Merciful,
Interest transactions are forbidden in Islam, which includes taking a house on mortgage. The majority of the contemporary scholars from around the globe including Shaykh al-Bouti, Shaykh Wahba Zuhayli and my respected teacher, Shaykh Taqi Usmani (may Allah preserve them all) have declared mortgages to be unlawful (haram) even in the west, except in dire circumstances.
Why wouldn’t it be, when Allah Almighty has declared war on those who involve them selves in this evil sin? The words of Shaykh al-Bouti from Damascus (Syria):
“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.”
Every individual must look at himself whether he is in the same position as the one who has the fear of perishing due to hunger. If so, then undoubtedly taking an interest bearing loan would be permissible, otherwise gaining worldly pleasures is too big of a price to pay in return for the punishment in the hereafter.
By looking into your case, I personally don’t feel that you are in a situation where it would be permissible for you to purchase a house on mortgage. You may, for the short term, reside in a rented house, with or without your husband.
In the long term, if it is possible for you to receive interest-free loans from family and friends, then that would be ideal. If that is not possible, you may resort to an Islamic bank or a financial institution for help.
The proposed house finance scheme provided by the Islamic Housing Corporation in Canada (ICHC) is not fully clear to me in order for me to comment on it. However, it seems that it is based on the “Ijarah” plan offered by many Islamic financial institutions. The following is the correct procedure for this plan:
The financial institution must not lease out a property which is not in it’s possession, as to sell or lease something which is not in your ownership is not permissible. Therefore, the institution must first purchase the property itself, or appoint the client as an agent to take possession and make an agreement of lease with him.
It should be remembered here that, if any damage was to be caused to the property in this period, the loss will be of the financial institution and not of the client.
Thereafter, the agreement of lease will be made, in that the financial institution and the client will make a fresh agreement of the property being leased out to the client.
Any damages caused to the property in this period will also be borne by the financial institution, unless the client is neglectful in maintaining the property.
The third stage is when the period of lease comes to an end and the client purchases the property from the financial institution on a minimum fee.
Here, it is not permissible to connect the lease agreement with that of the sale. One transaction can not be made a condition for the other. Therefore it will be necessary that a new agreement of purchase (with acceptance and offer) take place. Yes, one can make a promise to purchase, and many contemporary scholars have considered this promise legally binding in so far as you can enforce it through the courts.
Therefore, the agreement in the Ijarah plan will unfold it self according to the following:
1) The financial institution appoints the client an agent to purchase the property on its behalf,
2) The client makes a promise to take the property on lease after acquiring it in his possession,
3) The financial institution promises to sell the property to the client after the lease period is complete.
After this agreement is made, the client will only serve as an agent of the institution in the purchase of the property. Thereafter, this relationship of agency will terminate after which (according to the promise) the agreement of lease will come into play. After the completion of the leased period, a new transaction of purchase will be made.
The promise from the client to take the property on lease and from the institution to sell it after the termination of lease will only be a promise. However, the contemporary scholars have made this promise legally binding in light of the Maliki position.
The above is the correct procedure of the Ijarah plan with regards to the purchase of a house/property according to Shariah. The plan you outlined is not clear to me, hence I could not make a comment on it. If you have any more queries, feel free to contact us.
And Allah Knows Best
[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK