Paying Zakat whilst having the House on Mortgage

The general principle is that all loans payable can be deducted from the total of one’s Zakatable assets when calculating Zakat. If these loans are more than one’s assets, Zakat will not be obligatory. Otherwise, if the remainder is to the value of the Nisab (Zakat-payable amount), one must give Zakat from it.

Classical jurists (fuqaha) have explained these debts as “that which is demanded and claimed by other people. Whether it is the right of Allah, e.g. Zakat demanded by the Imam, or the right of the servants of Allah, such as: debts, dowry, etc.” (See Radd al-Muhtar of Ibn Abidin, 2/260 and Hidaya, 1/186)

The reason behind debts preventing the obligation of Zakat is that one of the conditions for the obligation of Zakat is that the wealth be in excess of one’s personal needs. When one has debts that need to be paid off, the Zakatable assets will not be in excess of his personal needs, as he needs to pay all or some part of this wealth to his creditors.

The Fuqaha usually don’t differentiate between the debt which is payable immediately and that which is deferred. However, there is a difference of opinion within the Hanafi School regarding its ruling. We find three different views on the matter:

1) An immediate debt and a deferred debt both prevent the obligation of Zakat, and both will be considered.

2) Only an immediate debt will be taken into consideration, and not a deferred debt.

3) If there is determination for repaying the loan (whether immediate or deferred), it will be deducted. Otherwise, it will be included in the total of zakatable assets.

The great Hanafi jurist, Imam al-Kasani (Allah have Mercy on him) related these three opinions from our scholars, but he did not prefer any one over the other. Imam al-Haskafi (Allah have Mercy on him) said in his Durr al-Mukhtar that, even long term and deferred debts will prevent the obligation of Zakat. Allama Ibn Abidin (Allah have Mercy on him) states whilst commenting on this in his Radd al-Muhtar:

“This opinion has been referred to Sharh al-Tahawi, where it is stated that, Imam Abu Hanifa (Allah be pleased with him) was of the opinion that long term debts do not prevent Zakat. Al-Quhustani added that this is the more correct position in the Madhhab.” (Radd al-Muhtar, 2/261)

In view of the above explanation, the following is the answer to your question:

Firstly, if you have the means and you are financially able to pay off the mortgage, then you must do that as soon as possible. Interest transactions are forbidden, and the quicker one rids oneself from the sin of Riba, the better.

Secondly; if you are unable to pay off your mortgage all at once, then – in light of the opinion of many latter Hanafi jurists – the entire sum of the outstanding mortgage will not be deducted for Zakat calculation. You may only deduct the outstanding installments payable for the coming lunar year, since this is the amount which is being demanded until the next Zakat payable date.

And Allah knows best