Explore the principles of Islamic mortgages and understand the difference between halal and traditional interest-based mortgages. We delve into their specifics and how they comply with Islamic law.
How is a halal mortgage different?
What Is a Halal Mortgage? Halal mortgages allow Muslims to finance home purchases while staying within the guidelines of their faith, which prohibits the payment of interest.
What is a haram mortgage?
At its core, the principle refers to the unequal exchange of fees resulting from borrowing money, particularly if that exchange is exploitative. While any mortgage should not be exploitative, the practice of interest being added to a loan does mean that a traditional mortgage will usually be considered haram.
What makes an Islamic mortgage halal?
With an Islamic halal mortgage, the bank buys the property for you and either charges you rent until you fully own it, or sells it back to you at a higher price. You will have a plan to pay it back in instalments, but there will be no interest involved.
Is buying house on mortgage haram in Islam?
A mortgage is a haram riba-based transaction that is based on a loan with interest in which the owner of the money takes as collateral the property for the purchase of which the borrower is taking out the loan, until the debt has been paid off along with the interest (riba).
Can a mortgage ever be halal?
Islam forbids interest-bearing loans, so Muslims may prefer to seek a halal alternative when purchasing a property. There are a range of Islamic mortgage alternatives available, allowing buyers to get on the property ladder while being sharia-compliant.
Is a halal mortgage allowed in Islam?
Islamic mortgages are considered halal mainly because they don’t involve the use of an interest-based loan. By the same token, traditional mortgages are widely believed to be haram, or forbidden, under Islamic law, because they necessitate the payment of interest on money.