Answered by Shaykh Abdul-Rahim Reasat
Question
I am a Muslim man living in America. I am doing my best to avoid riba. For example, they offered me about 1% apr for 72 months when buying my car. I told them I would not buy a car unless I got a 0% loan.
I am trying to find a 0% loan for a house, but I don’t think it’s possible in this country. I also remember the Prophet (Allah bless him and give him peace), saying follow the law of the land of your abode. That said if I cannot find a halal way to refinance my home. Is it ok to pay for this house, or do I have to sell my house to avoid riba?
Answer
I pray you are well and that Allah Most High rewards you abundantly for your efforts to avoid riba.
I don’t know why you need to refinance your home, but if it is to purchase a car, there may not be a need. Finance companies often use the term ‘interest,’ but it is not Riba as it does not fall into the Shari’a definition of Riba.
Suppose they offer you a contract in which you pay for the car over installments. In that case, they may use the term ‘interest,’ but they offer two contracts: one to purchase the vehicle outright and the other to buy it over a while at a higher price, which they distribute over several months. Both arrangements are acceptable and do not contain any riba. [Usmani, Fiqhi Maqalat]
There are some Shari’a compliant home financing options available in the West now. There may be some available to you in your country. It is best to consult with a scholar based there and look for an alternative to a mortgage.
If you can get interest-free loans from your friends and family, that would be excellent too.
Being Careful with Hadith
It’s a good practice to be wary of what statements you ascribe to the Prophet (Allah bless him and give him peace). I’m unaware of a particular narration in which he told us to follow the law of the land, but your point is clear. It does not, however, extend to making interest-based contracts permissible in every situation.
Please do look for viable alternatives. They are in many countries worldwide and should be in yours too.
May Allah grant you the best of both worlds.
[Shaykh] Abdul-Rahim Reasat
Checked and Approved by Shaykh Faraz Rabbani