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Home Purchase ‘ Options

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Question

Asalaamualaikum wa rahmatullah

I am a Muslim married Male with three young daughters under 7, living in a rented two bedroom property, The property has a number of issues including mould, which I am constantly fighting against, so we will need to move, and with 3 children ideally to a larger property. I have never owned a property and have been renting for the last 25 years. Rents in London are significantly higher for 3 bedroom properties, and would be challenging. I work full time, I am not likely to receive government housing, and waiting lists for affordable housing can take decades in this area. A relative owns a 3 bedroom property with their two sisters each owning a third. This property was inherited from their relative. The property value is approximately £800,000 and it is currently rented out.

One of the owners wishes to sell their 1/3 share of the Property, and would give us the option first before it goes on the open market. My relative would gift her 1/3 of the property for free. The final third would be rented from the other . If we were to acquire the property we would live exclusively in the property, just us. With regards to funding the costs of the 1/3 that I would have to pay for. I have viewed conventional mortgages and compared them with the “Islamic finance” models – GateHouse, Al Rayan etc.. purely from a cost comparison point of view. The difficulty is that the cost difference between the two means the Islamic finance option would put me from a monthly budgeting perspective at a considerable stretch, with the rent of the additional 3rd on top taking it out of my budget.

1. I am trying to understand if there are recommended organisations for such home purchases, and whether they are shariah compliant? They seem to have a model which leads to around £60,000 extra paid over the same time period.

2. I’m trying to understand if I am missing any valid individual dispensation for other options, based on circumstances for usually unacceptable finance (conventional mortgage)?

3. I’m looking for advice on any other options I have been making frequent dua for our circumstances to change and to have a place of security for my family. It seems to be an amazing opportunity to remain in London, where employment opportunities for my work are centred. If I’ve missed a question which may be relevant please feel free to answer it. Happy to provide further detail.

May Allah reward you well


Answer

We pray that Allah the Almighty opens up a way for you and your family. We understand the difficult situation that you are in. In response to your question:

  1. We do not have any recommendations regarding Islamic home purchase plans. It is difficult for us to provide a religious opinion on the companies you have mentioned without seeing their contracts. We would suggest speaking to their shari’ah advisory team and if you feel you are content with what they say then it would be permitted for you to take out a policy with them. If their model works out more expensive than a conventional mortgage this in of itself would not render the contract unlawful. You may also want to discuss this issue with the team.
  2. It would not be permissible to take out a conventional mortgage as one is always able to rent or relocate to a slightly cheaper area.
  3. The current option which you are exploring will result in you paying 1/3 of £800,000 as well as 1/3 of the rent for a 3 bedroom house. Even though you are benefiting from a discount of 1/3 this still seems to be quite an expensive option. This comes down to the fact that this 3 bedroom property is worth £800,000. You should be able to find a 3 bedroom property which is valued at nearly half that price even in London. If your relative is willing to gift you 1/3 of this house, you may want to consider asking, if she would be willing to sell her share herself and then gift you the equivalent amount so you can use that towards purchasing a house which is more affordable. This will allow you to remain within London but relocate to a more affordable area hence not impacting your work opportunities.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel

This answer was collected from FatwaCentre.org, which is overseen by Dr. Mufti Abdur-Rahman Mangera.

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