Purchasing a House which still has an Interest Bearing Loan
Question:
My parents own a home. They are not Muslims, as I am, Masha Allah. I am moving Insha Allah, and therefore, they now want to sell their home since I will not be the renter anymore. The house is valued, after a market analysis, at $75,000 – $85,000. I have a friend, whom is also a Muslim that is interested in buying their home. My parents would be selling their home to them for $5,000 down and $60,000 remaining. They have agreed to let them make payments to them monthly. My question to you is:
Is this halal being that my parents still have a mortgage on the house? After repairs, this house will be valued at ATLEAST $80,000 and they would be getting it for $65,000. Some people are saying that it is haram because there is still an interest bearing loan on the home.
Answer:
When one acquires a house on mortgage, then, despite the actual act of giving interest being unlawful, the house or property comes into one’s ownership. As such, it would be perfectly okay for another person to purchase this house and reside in it, for there is nothing wrong or filthy in the house itself.
Having understood this, if your non-Muslim parents sell the house to your Muslim friend without your friend having to take the responsibility of paying any remainder of the mortgage, then it will be permitted for your friend to purchase this house. It will be permitted for him to purchase the house regardless of what price it is sold at, as long as both parties mutually agree on a sum.
However, if by purchasing the house, your Muslim friend has to take up the mortgage and pay the remainder, it will not be permitted for him to purchase this house. The reason being is that in this case, your friend will be involving himself in the transaction of interest (riba) which is unlawful. If he defaults in his regular instalments, the interest will build up on him, hence in such a situation, purchasing this house will not be allowed.
And Allah knows best
[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK