Mortgaging a house through islamic banking in UK Dr Zakir Naik #hudatv

Summary

This video script discusses the differences between conventional and Islamic mortgage systems, focusing on whether Islamic mortgages in the UK are Halal. It explains how conventional mortgages involve interest-based loans, which are Haram in Islam, and contrasts this with Islamic mortgages that use partnership-based models like Murabaha or Ijara. These models avoid interest by having the bank co-own the property with the buyer, with the buyer gradually purchasing the bank's share. The script emphasizes the importance of ensuring that the mortgage system follows Sharia law and is certified by a reliable Sharia board.

Takeaways

• 😀 Conventional mortgages involve borrowing money from a bank and paying interest, which is considered haram in Islam.
• 😀 In conventional mortgages, the bank charges interest on the loan, making the practice usurious and against Islamic teachings.
• 😀 Rent-to-own schemes in conventional banks combine rent and purchase contracts, which is problematic and considered haram in Islam.
• 😀 In Islamic finance, the focus is on avoiding interest (riba) and using alternative contracts that align with Sharia principles.
• 😀 Islamic banks use contracts like Murabaha, Ijara, and Mudarabah, where the bank shares in ownership and rental income without charging interest.
• 😀 In a typical Islamic mortgage, the bank buys the property, and the buyer pays rent on the bank's share while acquiring the property over time.
• 😀 Islamic mortgage systems must be certified by a reliable Shariah board to ensure compliance with Islamic principles and avoid riba.
• 😀 A rent-to-own system in conventional banks, where ownership remains with the bank while the buyer rents, is considered haram in Islam due to dual contracts.
• 😀 The buyer's percentage of property ownership increases gradually as part of the payment plan in an Islamic mortgage system, leading to full ownership over time.
• 😀 As long as the Islamic mortgage system adheres to Shariah principles and avoids interest and dual contracts, it is considered halal (permissible).
• 😀 It is important to consult with a reputable Shariah scholar or certified Islamic bank to confirm that the mortgage product is fully compliant with Islamic law.

Q & A

What is the main difference between conventional and Islamic mortgages?

The main difference is that conventional mortgages involve lending money with interest, which is considered haram in Islam. Islamic mortgages, however, avoid interest by using models like shared ownership or rent-to-own, where the bank and buyer co-own the property and rent is paid for the bank's share instead of interest.

Why is conventional mortgage considered haram in Islam?

Conventional mortgages are considered haram because they involve lending money and charging interest (riba), which is explicitly prohibited in Islamic teachings. The borrower pays back the principal plus interest, making the entire transaction interest-based, which is against Sharia principles.

What does the Islamic mortgage system, like Ijara, involve?

In the Islamic mortgage system, such as Ijara, the bank and the buyer co-own the property. The buyer makes a down payment and the bank contributes the rest. The buyer pays rent on the bank's share of the property while gradually purchasing the bank’s share over time, ultimately gaining full ownership without involving interest.

What is the 'rent-to-own' model in conventional mortgages, and why is it considered haram?

The rent-to-own model in conventional mortgages involves paying rent to the bank while simultaneously buying part of the property. This is considered haram because it combines two contracts: renting and buying, while the bank retains ownership of the property, violating Islamic principles of ownership transfer.

Can Islamic banks charge rent instead of interest, and is it permissible under Sharia?

Yes, Islamic banks can charge rent instead of interest, and it is permissible under Sharia law as long as the rent is for the bank’s share of the property and not based on the loan amount. This rent is not considered interest (riba) but is instead a payment for the bank's co-ownership of the property.

What is the significance of the Sharia board in Islamic banking?

The Sharia board plays a crucial role in ensuring that the banking practices, including mortgages, comply with Islamic law. If the Sharia board certifies that the system follows Islamic principles and avoids interest or other prohibited elements, then the mortgage system is considered halal.

How does ownership transfer work in an Islamic mortgage?

In an Islamic mortgage, the ownership transfer happens gradually. Initially, the bank and the buyer co-own the property. As the buyer pays rent and gradually buys out the bank’s share, the bank's ownership percentage decreases, and the buyer’s ownership increases until the buyer fully owns the property.

What is the impact of rent increases in Islamic mortgage agreements?

In Islamic mortgage agreements, rent may increase over time, especially if the contract term is long. However, the total amount paid to the bank is still considered rent for its share of the property, not interest, and the gradual increase in ownership is part of the buying process.

Is it permissible for a person to enter into a conventional mortgage under Islamic law?

No, it is not permissible to enter into a conventional mortgage under Islamic law because conventional mortgages involve riba (interest), which is haram. Only mortgages that adhere to Sharia principles, such as those with proper rent-to-own structures and gradual ownership transfer, are allowed.

Can Islamic banks provide mortgages for other assets like cars?

Yes, Islamic banks can provide mortgages for other assets, such as cars, using similar principles. For example, the bank may co-own the vehicle with the buyer, charging rent for the bank’s share, while the buyer gradually purchases the bank's share until they fully own the asset.