Sheikh Abdel-Nasser Saleh
Assalamu Alaykum Wa Rahmatullahi Wa Barakatuh
All praise and gratitude are due to Allah SWT. May the blessings and peace of Allah SWT be upon His Messenger PBUH.
This question is an important and relevant one. It is directly related to our current situation living as Muslims in Australia, and the West more broadly. This question has been answered in many ways on many platforms, and one of the best answers I have come across while preparing this response is that which was published by the European Council for Fatwa and Research. Below is the summarised translation of the fatwa prepared by the Council.
When reading the fatwa, please bear in mind that the Islamic Shari’ah is not the law by which financial institutions are generally regulated. These institutions, such as banks, are governed by man-made laws. Usually, fatawa of this nature are trying to find the Islamic way of buying houses, and dealing with banks in general, within non-Islamic frameworks. In so doing, they are exercising ijtihad in an attempt to find a path for Muslims within a financial world that does not apply Islamic law. Thus, this fatwa is not guaranteed to be 100% correct, though it is the best according to the Shari’ah scholars’ knowledge.
“The issue of taking out home loans from traditional banks has been looked into by the European Council for Fatwa and Research due to its high relevance to residents in European and Western countries.
Various research has been presented regarding this topic, some supporting home loans and others opposing them.
The Council looked into both sides, discussed it extensively among its members, and the meeting ended with a majority agreeing on the following:
1. The Council emphasises the unanimous stance of the Ummah regarding the prohibition, or “tahreem”, of riba, and its classification among the seven major destructive sins through which one declares a war upon Allah SWT and the Prophet PBUH. It also emphasised that interest from banks (riba) is haram as agreed upon by the Councils of Islamic Jurisprudence.
2. The Council calls upon Muslims in Europe to strive to seek out halal alternatives that contain no form of impermissibility, as long as it falls within their capacity. These alternatives could be in the form of profitable selling, known as “bay’ul murabahāh” which is used by Islamic banks.
3. If the above are not possible at the current time, then – in light of the evidence, rules and Islamic Shari’ah considerations – the Council sees no harm in seeking the compound interest home loan in order to buy a house needed for a Muslim and their family’s accommodation. This is under the condition that one does not have another residential property, the house they are purchasing is their primary accommodation, and that he does not have a surplus of money that enables him to purchase the house through other means. The primary focus of the Council’s deliberation in coming up with the fatwa was on the principle of “Necessity permits the impermissible”, which is a settled principle extracted from five different Qur’anic excerpts. One example is Surah Al-Anaam, verse 119 which states, “He has already explained and specified to you what He has forbidden to you—except when compelled by necessity”, and from the same Surah after mentioning the impermissibility of certain foods, “But if someone is compelled by necessity—neither driven by desire nor exceeding immediate need—then surely your Lord is All-Forgiving, Most Merciful”. From this verse, the jurists agreed that a need could come down to a necessity, whether a private or public matter. It is useful to bear in mind that a need is defined as something that, if not met, the Muslim would be in a hard but liveable situation, whereas a necessity is something that needs to be met for one to continue living. Allah SWT has lifted hardship off the Ummah, as mentioned in Surah Al Hajj, verse 78: “He Who has chosen you, and laid upon you no hardship in the religion”, and in Surah Al Ma’idah, verse 6: “It is not Allah’s Will to burden you”.
The home (or dwelling) that drives away hardship for the Muslim is one that is suitable for him in terms of location, spaciousness and amenities. Despite the Council adopting the principle of necessity, it does not overlook the other regulating rule, which stipulates that the allowance cannot exceed the immediate need. Therefore, you cannot take out a mortgage with interest repayments in circumstances beyond immediate need, such as for investment properties.
It ought to be pointed out that rental dwellings do not fulfil all of the needs of a Muslim, nor does it make them feel secure. Despite fulfilling the financial obligation of rent, a tenant is susceptible to being vacated with little notice. They also cannot accommodate an increase in family members or large numbers of guests. Finally, when the tenant grows older, earning less or no income, they may be deprived of the means to pay rent.
This fatwa is further reinforced by the idea that a Muslim seeking out a home loan does not ‘consume’ riba (gain interest or benefit from usury) but rather, riba is taken from him (by paying interest). What was made haram in the Qur’an was ‘consuming riba’ (Akl- ur-riba) and this is haram under all circumstances. However, in the sunnah, this is extended to all conduct which engages in or permits usury, be it paying interest or witnessing a transaction that involves it. This falls under the rule of ‘forbidding the means and not the ends’. Another famous regulatory principle is: “What was made haram is haram in and of itself except if there is a necessity, and what was made haram to prevent the pretext of impermissible acts is not halal except if there is a need”. Thus, the scholars have agreed that, if necessary and if all halal alternatives are inaccessible, taking a home loan via riba is permissible.”
In conclusion, please note that before one buys a home with traditional mortgages, they must ensure that this fatwa applies to their situation so that it is valid upon them. These people must correctly judge themselves to determine whether their circumstances justify taking out a mortgage with a bank. We should not pick and choose elements of the fatwa, rather, we must ensure that we apply the fatwa after meeting all the requirements it provides. Otherwise, it would be similar to the one who says, “O You who believe, do not engage in prayer”, neglecting the subsequent words, “except when you are intoxicated”, thereby negating the meaning of the verse.
May Allah SWT make the path to the halal easy for us, make identifying the halal easy, and may He protect us from that which is haram. Ameen.
And Allah knows best.