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Clarifications On Mortgages Contracts
I watched your Aitrazat Series specificaly on the topic of “Sood”. I have listened to it many times now but I still have some questions and doubts which I would like your guidance. These questions and concerns are as follows:
(1) It is clear from the discussion that there is no Sood in case commodity is involved. Now for the case of mortgage, Ghamidi Sahib mentions in the discussions that the extra amount other than prinicipal is the Rent charged to the person. There is also a mention of that the Bank is the owner of the House. But in the agreements where the Bank is giving the mortgage, there is no indication of that Bank has the ownership of the property? Then how does the claim stands here?
In other words, the bank is simply giving me the loan and has no ownership over the property or car. Does the this make this Sood? Need guidance here!
(2) Second, for the extra amount charged (call it Interest in Banking lingo or Rent in our language), there are then two cases. First, where it is fixed rate and second, it is variable rate. For fixed, it makes sense that the total price of the house is fixed and we start paying the installments.
But for variable rates, the final price is not fixed. There is a whole arena of discussions and base for the price must be fixed to be then acknowledged for the fixed monthlty installments to occur.
How does the Ghamidi Sahib discussion covers this aspect. These fixed and variable rates are not discussed in the series. I am not sure of the reference, but in Islamic literature, for a commodity to be sold in installments, it must be agreed upon between the seller and buyer to have a fixed final price. With this logic, this seems like sood
Could you guide me here? Jazak Allah
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3 Replies
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Clarifications On Mortgages Contracts
updated 4 months ago
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Replies
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Bank’s giving it the name interest or markup or not writing in paper the ownership doesn’t change the nature of this transaction. If the amount were loan, the bank should have nothing to do with the use for the amount. Instead the bank makes it only for a commodity like car or house.
Rates are fixed or variable doesn’t make a transaction sood. The only thing to consider is if the transaction or a business involves an intention or act to harm or deceive the other party. If not then it is a lawful one.
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It still doesn’t answer my concerns.
For the case of mortgage, there are essentially three parts of a contract happening:
First, the sale agreement of house between seller and buyer at some fixed price. This is Halal and OK.
Second, Mortgage agreement where the mortgage company or bank puts a lien ( or claim against the house as a collateral) which is Ok in terms of agreements and Islam.
Third, the loan agreement between buyer and bank. Here this is problematic where we are essentially paying extra amount on the principal where the Bank has no ownership of the property. This according to definition becomes Sood.
So out of three simultaneous transactions, 2 of them are Halal and 1 of it, i.e., loan agreement, is Haram. So it should make the whole deal Haram.
Another thing about the price of the sale I need clarification is according to Fiqh and from the works of Islamic Ulemas and specifically Mufti Taqi Usmani, it is must to have the following:
— fixed price of the final sale
— for the duration of agreement and leasing, the ownership must remain with the seller or third party.
Above two conditions does not seem to be addressed by the car financing or house mortgages. How do you justify these then? Need guidance here please with references if possible.
Jazak Allah
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According to our understanding, sood is only the case of loan. This transaction is not loan at all. Therefore the question of additional amounts to principal amount is not sood but profit which the bank earns against time it gives to pay off the price of the commodity.
The price is fixed or subject to inflation, both are fine and justified.
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