Buying a house on an Islamic mortgage
Fatwa No: 89489


Can I buy a house by using Islamic mortgage, which are available British based Islamic banks?


All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.


We do not know exactly the reality of transactions which the Islamic banks deal with in Britain in buying homes but we say the following:

There are two procedures in buying a house through the bank: 

1) The bank really buys the house or the car, and once it is in its possession sells it back to the customer by instalments with a higher price. This method is permissible. This is known by buying and selling with a benefit [the original price of purchase is made known to the buyer], and Islamic banks deal with it.

2) The bank does not really buy the house or the car, but it just pays the money on your behalf in return of repaying (the bank) a higher price than what it actually paid. This method is forbidden because it is usury. In reality it is a loan with interest and this is the practice in banks that deal with usury and interest. So it is not permissible for a Muslim to enter this transaction because usury and interest are forbidden and have bad consequences in this life and in the Hereafter.

Allaah knows best.

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