we are trying to buy our first house and also try to have a family for the first time. But we are finding it very difficult to be able to afford an Islamic morgage due to needing a high deposit and the high repayments. Is it permissible for us to get a morgage with the bank with riba so we can start a family?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Brother in Islam,
We understand your predicament and we also understand how important it is to have a personal house. However, it is not permissible for one to take out any form of conventional mortgages as they entail riba (interest) as you have outlined in your case. The need to have a personal home does not justify breaking the commandments of Allah Taala, more especially when you cannot afford one and other permissible options such as renting a house is available.
Riba is haram and it causes the displeasure of Allah Taala. The prohibition of riba has been explicitly mention in the Quraan in Surah al- Baqarah with sever and stern warnings. Consider the following verses of the Quraan:
الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَنْ جَاءَهُ مَوْعِظَةٌ مِنْ رَبِّهِ فَانْتَهَى فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّهِ وَمَنْ عَادَ فَأُولَئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ (275)
Those who take riba (usury or interest) will not stand but as stands the one whom the demon has driven crazy by his touch. That is because they have said: “Sale is but like riba.’’, while Allah has permitted sale, and prohibited riba. So, whoever receives an advice from his Lord and desists (from indulging in riba), then what has passed is allowed for him, and his matter is up to Allah. As for the ones who revert back, those are the people of Fire. There they will remain forever.
يَمْحَقُ اللَّهُ الرِّبَا وَيُرْبِي الصَّدَقَاتِ وَاللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ (276)
Allah destroys riba and nourishes charities, and Allah does not like any sinful disbeliever.
إِنَّ الَّذِينَ آمَنُوا وَعَمِلُوا الصَّالِحَاتِ وَأَقَامُوا الصَّلَاةَ وَآتَوُا الزَّكَاةَ لَهُمْ أَجْرُهُمْ عِنْدَ رَبِّهِمْ وَلَا خَوْفٌ عَلَيْهِمْ وَلَا هُمْ يَحْزَنُونَ (277)
Surely those who believe and do good deeds, and establish Salah (prayer) and pay Zakah will have their reward with their Lord, and there is no fear for them, nor shall they grieve.
يَاأَيُّهَا الَّذِينَ آمَنُوا اتَّقُوا اللَّهَ وَذَرُوا مَا بَقِيَ مِنَ الرِّبَا إِنْ كُنْتُمْ مُؤْمِنِينَ (278)
O you who believe, fear Allah and give up what still remains of riba, if you are believers.
فَإِنْ لَمْ تَفْعَلُوا فَأْذَنُوا بِحَرْبٍ مِنَ اللَّهِ وَرَسُولِهِ وَإِنْ تُبْتُمْ فَلَكُمْ رُءُوسُ أَمْوَالِكُمْ لَا تَظْلِمُونَ وَلَا تُظْلَمُونَ (279)
But if you do not (give it up), then listen to the declaration of war from Allah and His Messenger. However, if you repent, yours is your principal. Neither wrong, nor be wronged.
Just a few years ago the world’s economy crashed due to the financial crisis. Hazrat Mufti Taqi Usmani (Damat Barakatuhum) mentions four main reasons in his write up called Post Crisis Reforms [1] where in Hazrat Mufti Saheb mentions why the crisis took course:
“If we analyse the root causes of this crisis in the light of the foregoing discussion, it will take no time to realize that there are four basic factors that were bound to create such crises.
1. Diverting ‘money’ from its basic function to act as a medium of exchange, and making itself an object of trade to an unlimited extent which gave birth to the greed of making money out of money, and turned the whole economy into a balloon of debts over debts.
Moreover, one of the essential requirements of restricting money to its basic function is that interest should be abolished from financing activities. Serious thought must be given to reshape our financial system on the basis of equitable participation in productive activities, to minimize debt transactions, and make them subject to the condition that all debts must be backed by real assets, meaning thereby that they should be created by real trade transactions of sale or lease etc.
2. Derivatives were one of the basic causes of the financial problems. Rather, Frank Partony, a former derivatives trader takes it to be the basic cause of the crisis. He observes:
“The mania, panic and crash had many causes. But if you are looking for a single word to use in laying blame for the recent financial catastrophe, there is only one choice: Derivatives.”
In order to curb this evil, derivatives must be banned.
3. As we have seen above, the sale of debts was one of the most prominent causes of this crisis.
We have already discussed the logic behind the prohibition of sale of debts. Packaging a large amount of debts in a bundle of CDOs, that was the initial cause of the present crisis, was never possible if sale of debts was disallowed.
4. Short sales and blank sales in stocks, commodities and currencies is the basic factor that makes speculation disastrous for the smooth operation of real commercial activities.
Since we are thinking about an overhaul that makes the economy safer, sustainable, and above all, equitable for the entire humankind, we have to change our outlook and should take courageous measures to redesign and reshape the economic system on noble values and just principles, and I hope what is submitted above may help to achieve this objective.“
If one examines each one of the above mentioned causes by Mufti Saheb, the common factor is interest in all four situations. These economic structures and systems that collapsed were designed by renowned world economists and bankers over the years who thought that nothing could breach their systems but, they failed to acknowledge the warnings of the Quraan e Kareem with regards to interest and ultimately had to face the effects of the financial crisis because of their interest and usury based dealings.
You may also consider other alternatives like arranging a private interest free loan from friends or relatives. You could also enter into a Diminishing Musharakah project with a partner. Below is a brief explanation on Diminishing Musharakah.
Diminishing Musharakah
A client wants to purchase a house for which he does not have adequate funds. He approaches the financier who agrees to participate with him in purchasing the required house. 20% of the price is paid by the client and 80% of the price by the financier. Thus, the financier owns 80% of the house while the client owns 20%. After purchasing the property jointly, the client uses the house for his residential requirement and pays rent to the financier for using his share in the property.
At the same time the share of financier is further divided in eight equal units, each unit representing 10% ownership of the house. The client promises the financier that he will purchase one unit after three months. Accordingly, after the first term of three months he purchases one unit of the share of the financier by paying 1/10th of the price of the house. It reduces the share of the financier from 80% to 70%. Hence, the rent payable to the financier is also reduced to that extent. At the end of the second term, he purchases another unit increasing his share in the property to 40% and reducing the share of the financier to 60% and consequentially reducing the rent to that proportion. This process goes on in the same fashion until after the end of two years, the client purchases the whole share of the financier reducing the share of the financier to ‘zero’ and increasing his own share to 100%.
This arrangement allows the financier to claim rent according to his proportion of ownership in the property and at the same time allows him periodical return of a part of his principal through purchases of the units of his share.
However, it is very important that the following steps are strictly adhered to as mentioned in order:
1. To create joint ownership in the property (Shirkat-al-Milk).
2. Giving the share of the financier to the client on rent.
3. Promise from the client to purchase the units of share of the financier.
4. Actual purchase of the units at different stages.
5. Adjustment of the rental according to the remaining share of the financier in the property.
Finally, we advise you to adopt taqwa and refrain from the mortgage in reference. Inshallah Allah Taala will grant you barakah in your life for adopting taqwa. For more details on a similar query you may refer to the following link:
http://www.askimam.org/public/question_detail/19939
And Allah Ta’āla Knows Best
Ismail Dawoodjee
Student Darul Iftaa
Zambia
Checked and Approved by,
Mufti Ebrahim Desai.