Islamic Althernatives for Mortgage

Riba (usury) has been clearly and explicitly prohibited in the Qur’an and Sunnah. The Holy Qur’an has declared war on those who do not abstain from this grave sin.

Allah Most High says:

“Those who swallow usury cannot rise up except as he arises whom the devil has prostrated by (his) touch. That is because they say: “Trade is just like usury” whereas Allah permitted trading and forbidden usury. He unto whom an admonition from his Lord comes, and (he) refrains (in obedience thereto), he shall keep (the profits of) that which is past, and his affair (henceforth) is with Allah. As for him who returns (to usury) – Such are rightful owners of the Fire. They will abide therein.

Allah has blighted usury and made charity fruitful. Allah loves not the impious and guilty.

Lo! those who believe and do good works and establish worship and pay the poor-due, their reward is with their Lord and there shall no fear come upon them neither shall they grieve.

O ye who believe! Observe your duty to Allah, and give up what remains (due to you) from usury, if ye are (in truth) believers.

And if ye do not, then be warned of war (against you) from Allah and His Messenger. And if ye repent, then ye have your principal (without interest). Wrong not, and ye shall not be wronged.” (Qur’an, 2.275-279)

Among the Islamic alternatives for riba-based transactions is Musharakah and Mudarabah. Interest predetermines a fixed rate of return on a loan irrespective of the profit earned or loss suffered by the debtor. In Musharakah and Mudarabah, there is no fix rate of return. Rather, the return is based on the actual profit earned by the joint venture, and if there is a loss, the financier will also bear this loss.

There are also other alternatives offered by the Islamic banks and financial institutions for the purchase of houses. Currently, house financing is based on Murabahah and Ijarah.

There are many Muslim and non-Muslim countries in which there are Islamic banks & financial institutions. Many banks have Islamic Units or subsidiaries, such as the Citibank in the USA and HSBC in the UK.
Many of these banks and financial institutions claim to be Shariah compliant. However, at times their dealings may not be in accordance with the principles of Shariah. Therefore, it is advisable that one consults a knowledgeable scholar before actually engaging into a transaction with these institutions. Explain to the scholar in detail the whole procedure of the transaction.

Here in the UK, we have the Manzil House Financing programme offered by the Islamic Investment Bank Unit (IIBU) who are part of the Kuwait Bank. Shaykh Taqi Usmani and Shaykh Nizam al-Ya’qubi of Bahrain serve as their Shariah advisors. I also attended one of their meetings along with a number of scholars from the UK and abroad. The alternatives for mortgage offered by them are generally Shariah compliant. Also, recently HSBC have launched their Amanah house financing scheme, and it is supervised by Shaykh Taqi Usmani and others.

And Allah Knows Best