Is a mortgage halal or haram?
The question is what the contract sells. If the bank lends you cash and the house is only collateral, you are repaying money with more money over the years: riba. If the bank buys the house, or a share of it, and then sells or rents it to you, the bank owns a real asset and bears its risk: trade. The name on the brochure does not decide it; the contract does.
The guidance
What does the contract name as the thing being bought and sold?
- Money. The bank lends me cash, and the house is only its collateralHaram · Riba · Qur’an 2:275The object of the contract is money, not the house. The bank hands over cash today and takes back more over the years as interest. Naming the house as collateral does not change what it is: a money loan repaid with an increase. Money for more money over time is riba, plainly.Other views: Abu Hanifa and his student Muhammad al-Shaybani held that riba between a Muslim and a non-Muslim in non-Muslim territory is not forbidden, and the European Council for Fatwa and Research relied partly on this in 1999 to allow a first-home mortgage in the West. Most Hanafi authorities today, including Mufti Taqi Usmani and the Deoband fatwa department, do not apply it, and many limit the old view to a Muslim receiving interest, never paying it. This guidance does not rely on it.
- The house. The bank buys it, or a share of it, then sells or rents it to meHalal · Trade · Hadith 2 & 5The object of the contract is the house itself. The bank owns a real asset, bears its risk, and profits by selling or renting it, not by lending money. Buying an asset on deferred payment is allowed, and profit is earned by bearing liability.The halal form: a diminishing partnership (Musharakah Mutanaqisah) or a lease-to-own (Ijara). The financier must genuinely take ownership and its risk, not just hold the deed as security. Each step (the partnership, the rent, buying the bank’s shares) must be a separate contract, and nothing may be added if you pay late.
People also ask
Is a mortgage haram if I have no other way to buy a home?
The Hanafi school, including Mufti Taqi Usmani, does not allow an interest loan for a home, and the fatwa has always been on impermissibility. The European Council for Fatwa and Research allowed one mortgage for a family home in Europe in 1999 out of need, citing an old Hanafi view; most Hanafi scholars today do not apply it. Renting, saving or Islamic home finance are the routes given.
Is Islamic home finance really different from a mortgage?
It is different when the financier genuinely takes ownership and its risk, each step is a separate contract, and nothing is added if you pay late. If the “rent” is only a loan repayment priced by an interest rate, it is riba wearing a lease’s clothing.
Is a diminishing musharakah halal?
Yes. You and the bank buy the house together, you rent the bank’s share and buy it out over time. The partnership, the rent and each purchase must be separate contracts, and your price may not rise if you pay late.
Can I keep a mortgage I already have?
Pay it off or refinance into a halal structure as soon as you reasonably can. What is already done cannot be undone; continuing to pay interest by choice should end when an alternative exists.
I already have a conventional mortgage. What should I do?
Taking it was wrong, so repent and take no new interest loans. The house is still yours and living in it is not haram. Stop paying interest as soon as you reasonably can, by paying the loan off early or moving to genuine Islamic home finance. How and when depends on your contract and circumstances, so ask a scholar personally.
Can I live in or inherit a house that was bought with an interest loan?
Yes. The borrowed money became the borrower’s, so the house is not haram to live in or to inherit; the interest was the borrower’s sin. If an interest loan is still owed on it, the heirs should together clear it or move it to Islamic finance promptly, and ask a scholar about their case.
Related questions
All questionsThe four schools on riba
This guidance follows the Hanafi school as applied today by Mufti Taqi Usmani and the AAOIFI standards. Notes mark where the Maliki, Shafi’i or Hanbali schools differ. The four schools on riba →