sakeenah.net - Islamic Mortgages

Islamic Mortgages

This is a copy of a post I received and was given permission to copy, I dont know who the original questioner is, if anyone can tell me that please share. There was a note at the end that was not part of the original Q/A that was removed, of course follow up any question you have on this topic with a scholar.

The following is from an email question:
"With regards to my sitting with the Allaamah Shaykh Ahmad An-Najmee
(hafidhahullah) last week,(Monday 2nd Sept '03) I will throw light on the
question that was asked regarding the HSBC-Amanah / Kuwaiti bank type
transaction Inshallah:

Question: Shaykh in England the price of land is very expensive and it is
not possible for Muslims to purchase property there. Except that previously
Muslims were dealing with usury, taking loans from banks. To avoid this some
banks now are beginning to offer what they call Islamic mortgages. They have
compiled a committee or "shura" of individuals specialising in the field of
Islamic banking. They are three individuals (and then I read their names to
the Shaykh from the HSBC booklet) do you know any of these Shaykh? [Reply:
No, I don't know any of them], Ok, shaykh in these contracts the following
aspects are involved:

1.      You chose a property and tell the bank about it

2.      The bank agrees to buy the property

3.      You sign a contract saying that you will buy the property from them
and rent it off them, such that your monthly repayments consist of:      a)
rent, b) repayments towards the house price, c) insurance which is
mandatory.

4.      The house remains in the name of the bank (the buyer) until such a
time as you pay your final payment towards the price of the house. At this
stage the house is transferred over to your name.

O Shaykh what is the ruling with regard to this transaction?

The Shaykh replied by saying that this transaction was not allowed due to
the following reasons:

1.      It consists of a contract within a contract, where you are
contracting to rent the property as well as buy it from them, and the
Prophet (sallallhualyhi wasallam) forbade dealings containing two sale
contracts in the same transaction. (Bay'atayn fee bay'ah)

2.      They are forcing you sign a contract upon their terms which may
contain truth or falsehood.

3.      It is not permissible to have a transaction with a precondition in
it (Bay'un wa shart) [as they lay down the precondition of you buying the
house from them, or that you rent the house from them]

4.      The transaction of "a rental agreement concluding with purchase"
(Al-eejaar al-muntahee ilat-tamleek) is a transaction that the committee of
major scholars have all agreed is an invalid (unislamic, impermissible)
transaction. [Note translated version of the fatwa the Shaykh is referring
to will follow inshallah.]

5.      The house should be transferred over as soon as the first payment is
made, not when the last payment is made.

6.      it is impermissible for them to sell you that which they do not own.

7.      Paying insurance is not allowed and unislamic.

The shaykh then continued to say that it is not at all permissible for the
shura of this bank to allow this type of transaction. Following this the
shaykh mentioned the terms of an alternative and permissible form of this
transaction.

The Alternative:

1.      you chose a property

2.      tell the bank to buy it and you will buy it from them inshallah,
based on negotiations after and only after they have fully purchased the
property and a) taken hold of the title deeds and b) the previous owner has
relinquished it totally.

3.      At this stage you can start to negotiate with them. You may agree or
disagree but you are not bound prior to this to buy the property.

4.      It is permissible however for the bank to use the property as a form
of security in case payments are not kept up.

5.      Insurance is not allowed.

When I asked the shaykh if insurance was mandatory and it was the last of
the issues to consider this transaction permissible could it be considered
as the lesser of two harms? The shaykh replied cautiously: yes.

I hope that this clears the issue in the minds of all, and I would encourage
anyone who has questions in this regard to send them in so that we can clear
this issue up fully well inshallah."

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