Respected Mufti Saheb, As-Salam Alaikum. The Shariah based home financing company will soon start their operation in our state. They are waiting pending approval of their licence to operate in our state. They have given us the assurance that they will get the license; it is just a matter of time. They are already operating in many other states. In the meantime, can we sign the home purchase agreement through a conventional bank using their interest-based mortgage application and later refinance our home with the Shariah based home financing company. Otherwise, we will loose a nice home, which is priced at “todays market” price, but will be built and ready in a year time. Moreover we will have to pay a higher price for the same home(if available), in the future. Please note that Shariah-based home financing company is also required by the USA laws to convert their profits into a traditional mortgage program and they have to report this as interest in their application form. Both the Bank and the Shariah-based company ultimately use the “same” application form (appproved by US Laws)on which the clients sign the loan agreement. Also, is it permissible for us to sign this application form? Please advise. Jazakallah and may Allah grant you His everlasting reward.
There is a fundamental difference in purchasing a house form a Shari’ah
based financing company and the conventional bank.
The initial transaction with the Shari’ah based financing company will be
according to the Shari’ah principles. The company changing the profits into
a mortgage does not make a difference. Furthermore, the company will be
excused as that is required by law. In the case of purchasing the house from
the conventional bank, the initial transaction will be based on interest,
hence, prohibited.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai