TAKING MORTGAGES AND HOME LOANS IN A NON-MUSLIM COUNTRY

Islam has declared interest (usury) to be Haram, and it is not permissible for any Muslim to deal in interest, by giving or taking interest from, and to another Muslim. However, for a Muslim to engage in a contract / transaction with a Harbi Kaafir (a rebellious non-Muslim in the land of a non-Muslim), wherein such a contract or transaction would normally be considered Haram between Muslims, will not be regarded as an interest-based transaction (i.e. with a Harbi Kafir). However, the condition in such a case is that the Muslim does not incur any loss, but rather he benefits or profits from it. The following Hadith has been cited in Hidaayah, which is an authentic book of Hanafi Jurisprudence:

Translation: There is no interest between a Muslim and a Harbi Kaafir in the land of a Harbi Kaafir (Darul Harb). [Al Hidaayah Sharh Bidaya Al Mubtadi, Volume 2, Page 73, Darul Kutbul ‘Ilmiyyah, Beirut]

The benefit which a Muslim attains from a transaction between a Harbi Kaafir and a Muslim is regarded as an ‘Aqd e Faasid (i.e. a defective or voidable contract), and this form of benefit is established through very strong reasoning, and the grounds for this being that, both the life and the wealth of a Harbi Kaafir is not secure or protected in a Darul Harb. So, in this case, the Muslim may benefit as he pleases from the wealth of the Harbi Kaafir, on condition that no form of lies and deception (fraud) takes place. To benefit from the wealth of a Harbi in this way, is permissible. Thus, interest cannot be established in such a case, and that which he (a Muslim) receives is regarded as being Mubah (lawful), and this will be the case even if the unbeliever refers to it as interest. This is as per that which has been cited in Hidaayah as follows:

Translation: This is because the wealth of an unbeliever is lawful and permissible (Mubah and Halaal) in his country. So, in whichever way the Muslim acquired this wealth, he has acquired lawful and Halaal wealth, on condition that there is no fraud or deception involved. [Reference Hidaayah, Waqaar ul Fataawa, Volume 1, Page 245]

It must be further clarified that in the case of such an ‘Aqd e Faasid, the Muslim should be the one who is receiving benefit (profit), and he should not be benefiting the unbeliever, because to give interest to an unbeliever is impermissible.

It is in Waqaar ul Fataawa as follows: It has been understood from all the books of Fiqh that, due to the wealth of a Harbi Kaafir being foundationally lawful, to take it on the basis of the ‘Aqd e Faasid is permissible, and it should be free from deceit, breaking pledges, or being compelled in it. With regards to giving interest to him, nothing has been written by any Imam or Faqih in this regard. Even according to us, A Muslim can take an additional amount from the Harbi Kaafir whilst regarding it as Maal e Mubah, that he cannot give it to him. [Waqaar ul Fataawa, Volume 1, Page 26]

It is written in Bahaar e Shariat as follows: To acquire the wealth of a Harbi Kaafir by way of an ‘Aqd e Faasid is not disallowed, meaning that, such a contract or transaction which is disallowed between two Muslims, is not disallowed if carried out with a Harbi Kaafir, on condition that such a contract/ transaction benefits a Muslim. [Bahaar e Shariat, Volume 3, Part 11, Page 153/Qadri Kitaab Ghar Bareilly Shareef]

However, in non-Muslim countries such as Australia, America, and Canada etc. it is very difficult to buy a house with cash, and thus, on the basis of this difficulty and harsh condition, the Fuqaha of this time have termed it permissible to take a loan and pay the additional costs, such as in the case of a mortgage due to the need, and on the basis of it being an extremely necessary requirement (Haajat e Shadeedah). It should be understood that, it is necessary for the need and the extremely necessary requirement, to be established and definite.

Thus, when Huzoor Taajush Shariah Alaihir Rahma was asked about the permissibility of securing a home loan through a bank, he replied as follows: If there is a need for it, or if it is an extremely necessary requirement, without which one will not manage, and even if he does manage, it will be a very dire situation; then this is an extremely necessary requirement. So, in such a case, permission is granted to take the loan from the bank. This is because there is greater benefit for a Muslim in this, and he has to pay back a little additional amount. This is in the case when the need is established, and the extremely necessary requirement is also established; and he should also be confident that he will manage to make the repayments, and that there is no risk of bankruptcy. [Audio Fatwa of Huzoor Taajush Shariah]

It is mentioned in Fataawa of Bareilly, in response to a query about taking an interest-based loan to purchase a house in America, that, based on the need and the extremely necessary requirement, be it for religious or worldly reasons, and if it is well-established, then to take a loan from a bank etc. or to take a personal loan from an unbeliever, even though the Kaafir will benefit, is permissible. It is further written that to take loans from Non-Muslims, and pay them an additional amount, for so called needs (which are un-established and not really required), and without which a person can still manage, is Haram as this is to benefit a Harbi Kaafir, which is disallowed according to the Shari’ah.

It must be understood that, this permission is only in the case of absolute and extreme need, and is not permitted if one already has a home and wishes to buy an additional house on mortgage, so that he may start a buying and selling business.

The Gist: Based on the case presented in the question, it must be noted that, in the case of need and if it being an extremely necessary requirement has been established, to take a home loan, meaning, a mortgage, in order to buy a house is permissible as per the Shari’ah.