Source: Ahkam wa Masail – Masail of Buying and Selling, Vol. 1, p. 383❖ The Shar‘i Status of Mortgage Transactions – A Detailed Clarification
Question:
Is a mortgage transaction permissible in Shari‘ah if it takes the following form:
I have taken a house from my friend for one year and paid him 60,000 rupees. Our agreement is that if I pay the full price of the house, which is 200,000 rupees, within a year, then he will transfer the house to my name. But if I am unable to pay the amount, then after one year he will return my 60,000 rupees to me.
Is this transaction, commonly referred to as a mortgage, valid in Shari‘ah?
✔ Answer:
Al-ḥamdu lillāh, waṣ-ṣalātu wa-s-salāmu ‘alā Rasūlillāh, ammā ba‘d!
Evidence from Ṣaḥīḥ al-Bukhārī
The Messenger of Allah ﷺ said:
«الظَّهْرُ يُرْکَبُ بِنَفَقَتِهِ إِذَا کَانَ مَرْهُوْنًا، وَلَبَنُ الدَّرِ يُشْرَبُ بِنَفَقَتِهِ إِذَا کَانَ مَرْهُوْنًا، وَعَلَی الَّذِیْ يَرْکَبُ وَيَشْرَبُ النَّفَقَةُ»
(Ṣaḥīḥ al-Bukhārī, Kitāb al-Rahn, Bāb al-Rahn Markūb wa Maḥlūb, Vol. 1)
Meaning:
“When an animal is mortgaged, it may be ridden in exchange for providing its upkeep. And the milk of a milk-giving animal may be drunk in exchange for its upkeep. But the person who rides or drinks is obliged to bear the expense.”
This ḥadīth clarifies two permissible forms of benefit in a mortgage transaction, which are explicitly mentioned in the text. Beyond these, any other form must be examined. If it involves something contrary to Sharī‘ah, it will be impermissible; otherwise, permissible.
❖ Analysis of the Current Case
From your question, the scenario is as follows:
① You loaned your friend 60,000 rupees.
② In return, his house was mortgaged to you.
③ The agreement is that if you pay 200,000 rupees within one year, the house will be transferred to your name.
④ If you fail to pay, your friend will return your 60,000 rupees after one year.
✿ Ruling: This transaction is impermissible in Sharī‘ah due to the following reasons:
➊ Interest-Based Transaction (Riba):
You loaned 60,000 rupees, which will be fully returned to you, but in the meantime, you benefit from the mortgaged house. This constitutes riba, because conditional benefit is being derived from a loan.
➋ Combination of Loan (Salf) and Sale (Bay‘):
This transaction combines both a loan and a sale. The Messenger of Allah ﷺ prohibited this:
«لاَ یَحِلُّ سَلَفٌ وَبَیْعٌ»
(Tirmidhī, Abū Dāwūd, Nasā’ī)
“It is not permissible to combine a loan and a sale.”
➌ Loan Leading to Lower Purchase Price:
You gave a loan of 60,000 rupees, and then fixed the house price at 200,000 rupees, which may be less than the market value. Setting a lower price on the basis of a loan is another form of riba, as benefit is being derived from the loan.
ھذا ما عندي والله أعلم بالصواب
