Answer
(Fatwa: 311/230/L=1432)
In the light of the holy Quran, it is haram to take interest-based loan. Almighty Allah says in the holy Quran:
أَحَلَّ اللّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا الآية [البقرة : 275]
و عن جابر رضى الله عنه قال : لعن رسول الله صلى الله عليه وسلم: آكل الربوا و موكله و كاتبه و شاهديه و قال: هم سواء (مشكوة: 244)
Hence, you should not take interest-based loan for home. However, if the bank agrees to deal in this way that first it buys the house and includes the desired interest in the original amount and sells back it to you and you pay it the whole amount in installments, then it is allowable.
Allah (Subhana Wa Ta’ala) knows Best
Darul Ifta,
Darul Uloom Deoband