Home Finance

In the name of God, Most Gracious, Most Merciful
All thanks and praise are due to God and all peace and blessings upon Prophet Muhammad

Muslims today struggle to buy homes while adhering to Sacred Law.  While Iana hopes to help find a solution to this problem, here are some thoughts for anyone who might be considering a conventional bank mortgage to buy a home:

Our beloved Prophet, God bless him and grant him peace!, taught that nothing is more valuable than our faith (iman); it is the door to eternal salvation and bliss.  He, God bless him and grant him peace, taught us to avoid unclear matters such that we may safeguard our religion (deen) and our honour.  He, God bless him and grant us peace, taught us the Words of God: that those who are God-conscious are promised a way out of every difficulty.  God never fails His promise.  He provides from places we cannot anticipate.  He suffices us.  Whoever leaves something for God, God always gives something better in return.  Our Prophet, God bless him and grant him peace, taught us that life is a test.  The best tests are stressful and bitter while you take them but they are the most rewarding because they separate the best from the rest.  They push you to be a better person.

Our scholars teach that the believer may be cheated in his wordly life (dunya) but never in his faith whereas the hypocrite may be cheated in his faith but never in his worldly life (dunya) – each one carefully guards what is most important to them.

Anyone seeking to own a home should understand: if it is in your destiny to own a home, then you will definitely own one sooner or later, and if it is not written for you to own one, then nothing you can do will ever change that.  Rather than disproportionately placing our attention, energy, time and focus on owning a home, we can shift our focus to what actually matters with the few breaths we have left on this Earth.  We don’t have to define our lives by this one metric.  If we have children, the only way to teach this valuable life lesson to them is by example, so they see dignity in action. Our lives are not defined by what we own, but rather by who we are (our hearts) and what we do (our deeds).

Conventional Mortgages: DON’T DO IT!

We strongly discourage our brothers and sisters from taking conventional interest-based mortgages.  Although there was a fatwa issued that made specific allowances for specific people to enter into conventional mortgages, and there may be legitimate circumstances where conventional mortgages may be permitted; however, ‘fatwa‘ by definition is case-specific; any God-fearing person considering a conventional mortgage would do his faith and his honour well to read this excellent and detailed analysis of the aforementioned fatwa by Dr. Salah al-Sawi: A Polite Reconsideration of the Fatwa Permitting Interest-Based Mortgages.  In addition to this you may read sections k3.0 and w43.0 in the famous Reliance of the Traveller by Sheikh Nuh Keller (available by publisher here).

If you seek a specific fatwa for your circumstance, we recommend that you consult a truly God-fearing, pious, knowledgeable and wise scholar – often Imams in mosques are not trained in modern banking and financial instruments.  It may not be appropriate to ask them to give you a fatwa on such a complex topic, just as it wouldn’t be appropriate to ask your family physician to perform neurosurgery.

We’ve personally seen and heard of people who negligently engaged in conventional mortgages and have seen the negative impact it has had on their lives.  That being said, the doors of repentance (tawbah) are wide open for anyone who falls into sin, and there have been many who erred and were blessed to get back up and set their lives aright.  We’ve also seen people who were patient while avoiding conventional mortgages and were blessed in many many beautiful ways in their religion and their life because they stayed away from forbidden usurious mortgages.  Whoever leaves something for God, He gives them something better.

The irony is that if even a small percentage of our community took such a principled approach to home ownership, there would be many more viable options to choose from.  When we acquiesce to conventional usurious mortgages, there is no consumer pull for Islamic options to emerge – it becomes a cycle that keeps us in the same boat, generation after generation.

The Prophet of God, God bless him and grant him peace!, advised us to seek a fatwa from your heart as the truth puts your heart at peace and falsehood causes internal unrest – even if all the people give you fatwa about a certain matter.

Renting is a permissible (halal), and often better option than buying.

Renting has some important benefits that one should seriously consider before buying:

1. Flexibility: Renting allows you to pick up and move without strings attached. You might move to a better home, to receive a cheaper price, or to be closer to family, work, or a particular school.  You may move to a totally different city, which is especially valuable in our times when people often lose jobs or are forced to move elsewhere for work. In many cities, home prices are artificially inflated due to predatory lending practices; when prices inevitably fall (sometimes drastically), people are anchored to their mortgaged homes and unable to leave them or are forced to leave them at a loss – we have, sadly, witnessed this many times, especially since 2008.

2. Limited Liability: Renters are far less liable for costs such as:  routine maintenance, upkeep, property taxes and unexpected repairs. Again, this is often a significant expense in modern times when homes are built hastily and with poor quality control.

3. Less Stress: Renters do not need to worry about the value of a home decreasing.  Most often, home ‘ownership’ actually means owning a very large bank debt – the bank is the actual home owner, although the debtor is on the hook for all the costs associated with home ownership (e.g. maintenance and upkeep and ongoing renovations).  Consumer debt has been linked to depression, anxiety, obesity and other adverse health outcomes.*

Renting vs. buying is not a black-and-white issue; most of the popular discourse on home-buying comes from bankers, realtors and other people who make their money selling mortgages.  They are not interested in renting; their advice is far from objective.  There are other options worth considering.

What Islamic options for buying a home exist?

Many organizations are working to offer solutions to the problem of usurious mortgages.  In Canada Ansarco (www.ansarhousing.com) and Interest-Free Housing COOP  (interestfreehousing.ca) have been pioneers in Islamic home financing.  Some Muslims have approached credit unions like Assiniboine (www.assiniboine.mb.ca/Personal/Borrow/Mortgages/Islamic-Mortgage) to offer Islamic Home Finance.  Read the Iana disclaimer about other organizations.

In the US there are many options as well.  Do your background research; there are some companies who claim to offer solutions that honour Sacred Islamic Law but in essence do not.  Proceed with caution.

Perhaps you can do more research to see what is available where you live and if nothing is available, perhaps you can approach some credit unions to offer Islamic home finance – this would be a tremendous service to your community.

Keep things in Perspective.

Our struggles and sacrifices in home ownership are for the sake of Allah alone.  There is no doubt that it is much ‘easier’ to sign up for a bank loan like many others.  The mere fact you have read this far into this article is a proof that your struggle is sincerely for Allah.   You will surely be rewarded for every instant you endure difficulty in His Way.

We are advised by the Holy Prophet, God bless him and give him peace, to look to those worse off than us, so that we may appreciate His Blessings on us.  When we sincerely appreciate what He has given, He gives more.  The problem of home ownership and usurious mortgages are a great blessing and a sign of the great bounty Allah has bestowed on us.

We pray for guidance and ask Allah to grant you and your wonderful family whatever is best and to make it easy and blessed.  We pray that you and your family are saved from all harm – and the greatest of harms are those of the Afterlife – and we pray that God opens the doors for all goodness.

Was’salam, Peace.

*Short-term lending: Payday loans as risk factors for anxiety, inflammation and poor health. SSM Popul Health. 2018 Jun 7;5:114-121. doi: 10.1016/j.ssmph.2018.05.009. eCollection 2018 Aug.  This article lists more than 20 articles that have linked consumer debt to depression, anxiety, poor psychological well-being, high blood pressure, obesity, child behavior problems, lower life expectancy and more.