Riba and the Ruling on Mortgages and Student Loans Cases

Riba and the Ruling on Mortgages & Student Loans Cases

Question:

1. Ruling on dealing with mortgages in a non-Muslim country. Perhaps my question has been asked many times before. It is about mortgages in non-Muslim countries. We live in a western society and we live in rented accommodation so as to avoid riba. Recently we found out that there are no houses for rent, and 96% of the market is based on mortgages. All houses are offered for sale only. Some of them told me that in this situation it is permissible for me to  buy a house by means of a mortgage and, moreover, it is possible to get the mortgage in the name of family insurance, so that the individual does not pay riba or a mortgage; rather it is paid by the insurance. Is it permissible to get a mortgage in the name of the family insurance, in such a way that you and other trustees or borrowers are not dealing directly with the bank and the lawyer takes care of dealing with the mortgage on your behalf?
I hope that you can advise me as to whether that is permissible or not.

2. Ruling on student loans. I am a Muslim student living in Norway, studying in university there. I have a question about student loans given by the university. This loan is interest-free, and it is given to students, and if the students pass the half-year exam, the loan is turned into a grant or gift from the university, but if they do not pass the exam, it remains as an interest-free loan until the end-of-year exam. But if a student leaves or graduates, or if the loan is not turned into a grant or gift from the university, it becomes a debt, and in these three cases, interest is to be paid on the loan. My question is: is it permissible for me to avail myself of this loan? Is it halaal? Because I am going to complete my studies this year, and by Allah’s grace I did not fail in any year at all, and it will never happen, by Allah’s leave, in the future. Therefore if I take this loan, it will turn into a grant, in sha Allah, and if I fail in any exam or stop studying, praise be to Allah I have money to pay off this loan immediately. I am not in need of this loan, but because it will turn into a grant after the exam, I want to take it. What is the Islamic ruling on this matter?

3. If the state gives him a loan so that he can study, on condition that if there is any delay in repayment, he must pay interest. I am about to begin University, and I have saved some money, but it is not sufficient. The government of the country in which I live offers a loan to students, for which you do not have to pay interest if you repay it within six months after graduating, at which point the government will require you to pay interest, if you have not finished paying off the loan within six months. I intend to take only as much as I need, and to repay the loan within six months, before interest is added. Is it permissible for me to accept this loan?

4. Riba is haraam for the one who takes it and the one who pays it, and it is haraam to help with it in any way whatsoever. In one of the questions on your website you stated that working in an auditing office that deals with customers who are involved in some riba-based transactions is not permissible, and you quoted the hadeeth of the Prophet (blessings and peace of Allah be upon him) in which he cursed four categories of people, including the two who witness riba and the one who writes it down. But some commentators on the hadeeth, such as al-Haafiz ibn Hajar, said: This only applies to the one who helps the one who is engaging in riba; as for the one who writes it down or witnesses what happens so as to ensure the rights of both parties, his intentions are good and he is not subject to the warning mentioned; rather it applies only to the one who helps the one who engages in riba by writing it down and witnessing it. In the commentary of al-Abi on Saheeh Muslim, it says: What is meant by the one who writes it down is the one who writes the document, and what is meant by the one who witnesses it is the one who witnesses it and supports the deal. They are equally subject to the curse because the contract cannot be done except with all of them. What is the evidence for the view of the scholars (apart from Ibn Baaz) that the hadeeth is general in meaning and applies to all of them, those who help and those who do not?

Answer:

1. Praise be to Allaah.

A mortgage is a haraam riba-based transaction that is based on a loan with interest in which the owner of the money takes as collateral the property for the purchase of which the borrower is taking out the loan, until the debt has been paid off along with the interest (riba). If the debtor is late in making payments, then the owner of the money is entitled to sell the property and take back his money. 

This transaction is offered by riba-based banks or real estate mortgage companies, and this transaction is done when the one who wants to buy a house chooses a house, then he goes to the mortgage company – or to the riba-based bank – to ask them to buy that house and he agrees to pay the money in instalments, plus the interest that has been agreed upon. A representative of the company or bank meets with the owner of the house and the third party, namely the borrower, and the price of the house is paid in full to the owner. In some cases the borrower pays part of the price (down payment). And the contract is signed with the borrower for the money paid to the owner of the house plus the interest. The house is mortgaged to the mortgage company or bank that pays the money to the owner of the house. If the borrower fails to pay any instalment on his loan, the mortgage company has the right to sell the house in order to get back the rest of the money that it is owed by the borrower. 

This transaction clearly comes under the heading of blatant riba. Allah, may He be exalted, has forbidden riba and has issued a warning to those who consume it of a severe punishment as He, may He be exalted, says (interpretation of the meaning):

“Those who eat Riba (usury) will not stand (on the Day of Resurrection) except like the standing of a person beaten by Shaytaan (Satan) leading him to insanity. That is because they say: "Trading is only like Riba (usury)," whereas Allah has permitted trading and forbidden Riba (usury). So whosoever receives an admonition from his Lord and stops eating Riba (usury) shall not be punished for the past; his case is for Allah (to judge); but whoever returns (to Riba (usury)), such are the dwellers of the Fire - they will abide therein”. [QS al-Baqarah 2:275]. 

This riba-based transaction is not permissible either in Muslim countries or non-Muslim countries; it is not permissible in order to acquire houses or stores. 

Some contemporary scholars have permitted this riba-based transaction if it is in a non-Muslim country and it is done in order to acquire a house in which to live. This permission is attributed to the Hanafi madhhab, and some evidence is quoted for it. But many scholars have challenged this fatwa, including Shaykh Salaah as-Saawi (may Allah preserve him) in his book Waqafaat Haadi’ah ma‘a Fatwa Ibaahat al-Qurood al-Ribawiyyah li Tamweel Shira’ al-Masaakin fi’l-Mujtama‘aat al-Gharbiyyah. And Allah knows best.

2. Praise be to Allah. With regard to student loans, they must fall into one of three categories:

1.Where the loan does not involve riba, and the student pays back what he took, without any interest. In this case it is permissible to take this loan, and there is no problem.

2. Where the loan involves riba, and the one who takes the loan is required to pay back the loan with interest. In this case it is not permissible to take this loan, because it is riba.

3. Where the loan does not involve riba originally, but in some cases it involves a riba-based condition, such as when the student is told: This loan is to be paid back as is, or it is a grant to you if you pass all your exams, but if you give up studying or fail, or you delay repaying the loan beyond the stipulated period, you will have to repay the loan with interest at a specific rate. In this case it is also not permissible to take that loan, even if the borrower is determined to succeed or is confident that he will not have to pay interest, because this contract involves approving of the riba-based condition, in addition to the possibility of falling into it, if circumstances arise that lead to him not succeeding or not completing his studies.

Based on that, it is not permissible for you to take this loan, because it involves a riba-based condition, and you stated that you do not need that loan. This requires you to refrain from taking this loan. And Allah knows best.

3. Praise be to Allah.

It is not permissible to sign a contract for a loan that includes this riba-based condition, because that involves committing to pay riba. Moreover there is the possibility of actually falling into it, if circumstances arise that lead to delay in repayment.

The scholars have explained this with regard to a similar issue, which is taking loans by means of credit cards.

It says in a statement issued by the International Islamic Fiqh Council, which is attached to the Organisation of the Islamic Conference, in its twelfth session held in Riyadh in the Kingdom of Saudi Arabia, 25 Jumaada al-Aakhirah – 1 Rajab 1421 AH (23-28 September 2000) concerning the topic of credit cards:

It is not permissible to issue or use credit cards that are not preloaded, if there is a stipulation of riba-based interest charges, even if the one who requests the card is determined to pay off the debt within the free grace period. End quote.

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) was asked: The banks offer their customers a credit card (Visa), which enables the customer to withdraw a certain amount of cash from the bank, even if there is no money in his account at that time, on the basis that he will repay the bank after a certain time period, and if he does not repay it before the end of that period, then the bank will ask the customer to pay back more than he withdrew. Please note that the customer will pay an annual fee to the bank in return for using that credit card. I hope that you can explain the ruling on using these cards.

He replied: this transaction is haraam, because the one who signs up for it is committing himself to pay riba if he does not repay within the stipulated time period, and this commitment is invalid, even if a person believes or thinks it most likely that he will pay it off in full before the end of the stipulated period. That is because his circumstances may change, so that he will not be able to pay it off. This is something that is in the future, and no person knows what will happen to him in the future. Therefore a transaction of this nature is prohibited. And Allah knows best. End quote (from Majallat ad-Da‘wah, issue no 1754, p. 37.)

But if it is not possible to study except by taking a loan from the state, and you are determined to pay it off in a timely manner, without being compelled to pay interest, then we hope that you will be excused.

This website put the following question to Shaykh Muhammad ibn Saalih al-‘Uthaymeen (may Allah have mercy on him):

The Visa credit card includes a condition stipulating riba if there is a delay in paying it off, requiring me to pay a penalty. But in the place where I live in America, it is not possible for me to rent a car or a shop or avail myself of many public services except by using a Visa card, and if I do not use it, I will be putting myself in an unbearable position. Does my commitment to pay off within a certain time period, so that I will not owe any interest,  make it permissible for me to use this credit card, so as to relieve the hardship I am faced with?

He replied as follows:

If the hardship faced is real and the possibility of delaying repayments is remote, then I hope that there will be nothing wrong with it.

Question:

Does the invalid condition that stipulates riba render the contract invalid or not?

4.If the contract contains an invalid condition, it does not render the contract invalid, for several reasons:

1. Necessity

2. Because the condition is not going to be applicable, as the man thinks it most likely that he will pay it off on time.

As it is the case that the man thinks that he will pay it off on time, and the condition is not applicable, and because of necessity – which is the final and most important point – I hope that there will not be anything wrong with this, because we have a real issue, which is necessity, and we have something uncertain, which is delay in payment. And paying attention to that which is real and certain is more appropriate. And Allah knows best.

However, our advice is to look for another means of paying the costs of study, far removed from riba and its dangers. And Allah knows best

Praise be to Allah.

Firstly: Auditing the accounts of customers who deal with riba is haraam work, because it involves approving of riba, writing it down, and keeping quiet about it and not denouncing it. 

Secondly:  Muslim (1598) narrated that Jaabir said: The Messenger of Allah (blessings and peace of Allah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same. 

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: That is, (they are all the same) in terms of being cursed, because they co-operated in that. End quote (from Fataawa Noor ‘ala ad-Darb, 16/2) 

Imam al-Bukhaari (may Allah have mercy on him) referred to this hadeeth that was narrated by Imam Muslim in the title which he gave to a chapter of his Saheeh, which he called: Chapter on the one who consumes riba, the one who witnesses it and the one who writes it down. Then he quoted two hadeeths in this chapter, one of which was the hadeeth of ‘Aa’ishah: When the last part of al-Baqarah was revealed, the Prophet (blessings and peace of Allah be upon him) recited it, then he forbade trade in alcohol. The second hadeeth is the hadeeth of Samurah, according to which the Prophet (blessings and peace of Allah be upon him) said: “Last night, I dreamt that two men came to me and took me out to a sacred land, then we set out until we came to a river of blood in which a man was standing, and on the bank of the river there was another man in front of whom were some rocks. The man who was in the river came, and when he wanted to get out, the (other) man threw a rock in his mouth, and sent him back to where he had been. Every time he came and wanted to get out, he threw a rock into his mouth and sent him back to where he had been. I said: ‘What is this?’ He said: ‘The one who you saw in the river is the one who consumed riba.’ 

Al-Haafiz Ibn Hajar (may Allah have mercy on him) said: 

Ibn at-Teen said: There is no mention in these two hadeeths of the one who writes down riba and the one who witnesses it. My response is that he mentioned them by implication because they help the one who consumes it to do so. This only applies to the one who helps the one who is engaging in riba. As for the one who writes it down or who witnesses the deal in order to tell exactly what happened, this is a good intention and is not included in the warning mentioned. Rather what is included is the one who helps the one who is engaging in riba by writing it down and witnessing it”; his status is the same as that of the one who says “Trading is only like Riba (usury)” [see QS al-Baqarah 2:275]. End quote. 

Shaykh Ibn ‘Uthaymeen (may Allah have mercy on him) said: 

“The one who helps another to commit sin will incur a burden of sin as much as he deserves. It is proven that the Prophet (blessings and peace of Allah be upon him) cursed the one who consumes riba, the one who pays it, the two who witness it and the one who writes it down, because the two witnesses and the one who writes it down are helping to confirm this transaction, so they incur whatever they deserve of the curse. End quote ( from al-Liqa’ ash-Shahri, 35/24) 

In fact what we have previously affirmed on our website does not differ in the slightest from what we have quoted here and what the questioner has quoted from al-Haafiz Ibn Hajar or from al-Abi (may Allah have mercy on them both). Auditing bank accounts or the accounts of riba-based companies comes under the heading of helping in the haraam riba transaction and participating in it; it is not possible to complete riba-based deals without the help of accountants. But there remain these two forms that are not included in haraam writing down or witnessing: 

1.Where one witnesses or writes down the deal in order to document it and testify to the involvement of the people who are party to it, as was mentioned by al-Haafiz Ibn Hajar (may Allah have mercy on him). This is like one who sees a crime such as murder or theft taking place, so he takes pictures, or he writes down what happened, so that he may give testimony concerning it before the judge and help to catch the perpetrator and help justice. This person has nothing to do with the criminal act and therefore has nothing to do with the perpetrator. And he is not helping with the sin or crime in any way whatsoever; rathe, in fact he was striving to change evil and establish justice to the best of his ability. 

This is what al-Haafiz Ibn Hajar (may Allah have mercy on him) was referring to, and in our previous answers we were not suggesting that this kind of action is haraam; rather it is something that is Islamically prescribed and is necessary.

 2. Where a person or company or accounts department enters into a transaction with another person or company or firm that deals with riba or other haraam transactions, but the first party has nothing to do with its haraam actions; rather he or they are dealing with them within the limits of permissible transactions and contracts. 

For example, the company may be dealing with riba-based transactions, but my job is supervising a permissible project that does not involve any riba-based transactions, or their riba-based transactions are between them and the bank, and someone else takes care of dealing with customers, buying and selling and so on, which has nothing to do with the riba-based transactions. In such cases, there is no blame on the one who deals with the company or plays any part in it. We have never disallowed this type of involvement before; rather we stated clearly that this is permissible 

Shaykh Ibn ‘Uthaymeen said: 

It is permissible for a person to deal with someone who deals with riba, but his interactions with him are done in a sound manner. For example, it is permissible to buy goods from this man who deals in riba, and it is permissible to borrow money from him, and there is nothing wrong with that. The Prophet (blessings and peace of Allah be upon him) used to interact with the Jews, even though they used to consume haraam wealth; he used to accept their gifts and invitations, and he bought and sold with them too. 

To sum up: if a person earns money from haraam sources but you deal with him in a permissible transaction, there is no blame on you for doing so. End quote from Fataawa Noor ‘ala ad-Darb, 16/2 . And Allah knows best.

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(Source: https://islamqa.info/en/answers/ ) . Questions answered by: Islam Q&A team.

Editor: Ustaz Sofyan Kaoy Umar. e-mail: ustazsofyan@gmail.com