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Are the contemporary "Halaal Mortgages" compliant with Islaamic Shari'ah?

All praises be to Allaah, Lord and Sustainer of the worlds, and may the peace and blessings of Allaah be upon our Prophet Muhammad (peace be upon him) and upon his family and companions.

Without going into minute detail, there are three main problems with all contemporary so called "Shari'ah compliant" house buying schemes or "Halaal Mortgages."

1. None of the banks or investors running the house buying schemes own any property, rather the purchaser finds the property he wants to buy and the bank or investor finances it.

It is not permissible for a seller to sell something which is not in his possession; the evidence for this is the following:

The Prophet (peace and blessings of Allaah be upon him) said to Hakeem ibn Hizaam:

“Do not sell that which you do not have.”

(Narrated by al-Tirmidhi, 1322)

And he (peace and blessings of Allaah be upon him) said:

“It is not permissible to sell something on condition that the purchaser lend you something, and it is not permissible to have two conditions in one transaction, and no profit is permissible unless possession has been taken of the goods, and you cannot sell what is not in your possession.”

(Narrated by Ahmad and the authors of al-Sunan with a saheeh isnaad)

Al-Daaraqutni and Abu Dawood (3499) narrated from Zayd ibn Thaabit that the Prophet (peace and blessings of Allaah be upon him) forbade selling goods when they have been bought, until the merchants had added them to their own goods.

Therefore, if the investor does not own the property but is simply financing it, then this essentially means that the investor is lending the purchaser money for buying the house.

2. Lending money (loan) in Islaam is not a transaction (to earn profit), rather it is a deed done purely for earning reward as Allaah says:


“Help you one another in Al-Birr and At-Taqwa (virtue, righteousness and piety)”

[al-Maa'idah 5:2] 

And Allaah says:

"And if the debtor is in a hard time (has no money), then grant him time till it is easy for him to repay, but if you remit it by way of charity, that is better for you if you did but know."

[Al-Baqarah: 280]

And it is not permissible to return a profit on a loan as this would be the essence of Ribaa (Usury or interest).

3. All the rent to buy or lease schemes involve two sales in one or even two conditions in one sale similer the transactions made by credit cards, or most hire purchase schemes and  are not permisible because;

The Prophet (peace and blessings of Allaah be upon him) said:

“It is not permissible to sell something on condition that the purchaser lend you something, and it is not permissible to have two conditions in one transaction, and no profit is permissible unless possession has been taken of the goods, and you cannot sell what is not in your possession.”

(Narrated by Ahmad and the authors of al-Sunan with a saheeh isnaad)

Al-Tirmidhi (1152) narrated that Abu Hurayrah (may Allaah be pleased with him) said: The Messenger of Allaah (peace and blessings of Allaah be upon him) forbade two transactions in one. This was also narrated by Ahmad, al-Nasaa’i and al-Tirmidhi classed it as saheeh.

Even if these investors pretend that the two agreements (Musharikah & Ijarah) are independent of each other, both of these are made with the same individual for the same property and both transactions are in this way linked together. This is nothing but trickery, first to turn the buying of a house for personal use into a business (Musharikah) and then split it into two halves to achieve the final goal of earning money by lending money. The purchaser interestingly ends up paying the same amount or sometime more than a high street mortgage.

It is necessary for Muslims to avoid these transactions, because these are essentially loans with an extra amount to be paid when the loan is paid off. This is no more than a trick which ends up being the same as the ribaa which is forbidden by the Qur’aan and Sunnah and according to scholarly consensus. It is essential to forego dealing in such transactions, in obedience to Allaah and His Messenger (peace and blessings of Allaah be upon him).

"Each person will be asked, on the Day of Resurrection, about his wealth: where he acquired it from and on what he spent it."

(Narrated by al-Tirmidhi, 2417)

We ask Allaah to help and guide us to do all that He is pleased with and keep us away from every thing that He is displeased with, and his Peace and blessings be upon His last Prophet Muhammad.

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