Is Mortgage Haram Or Halal? Best Guide 2023

Reviewed by: Shakira Ahmed
Fact Checked by: Shahina Islam

Is Mortgage Haram Or Halal

Is Mortgage Haram: Owning shelter over your head is one of the most basic needs of any man. However, for Muslims comes, another important question is Mortage haram.

The practice of adding interest to the loan amount is the main cause for concern. Interest payments on conventional mortgages are common and are considered to be a type of riba. According to this viewpoint, getting a traditional mortgage is prohibited since it includes engaging in an interest-based transaction.

In this blog post, we shall see how and why taking a mortgage is indeed prohibited in Islam and what are the halal alternatives for it.

Is Mortgage Haram?

The majority of Islamic scholars concur that interest-bearing traditional mortgages are prohibited by Islam. Riba is forbidden, and the entire framework supporting conventional housing loans is viewed as haram.

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What Criteria Must Be Met For A Mortgage To Be Halal?

In collaboration with Muslim academics, Islamic mortgages have been created to give devout Muslims who want to buy property a halal alternative. The following conditions must be met for a mortgage to be deemed halal:

  • The mortgage cannot include the exchange of interest (riba), which is against Islamic law. Instead, a profit-sharing plan or a set charge for the use of the funds must be agreed upon by both the lender and borrower.
  • According to Islamic law, the mortgage must be set up in a certain way. For instance, the lender could buy the asset and then sell it to the borrower for a higher price that is paid in installments. The term “Murabaha” refers to this particular mortgage.
  • The mortgage cannot contain any elements of speculative (maysir) or doubtful (gharar) behavior, both of which are against Islamic law. The mortgage’s terms and conditions must be unambiguous and open.
  • A principal property purchase, for example, qualifies as a legitimate need for the borrower to hold a mortgage. It might not be halal to buy a second home or an investment property.
  • The minimum deposit that the borrower is required to provide varies based on the lender and the kind of mortgage. For instance, several Canadian lenders demand a minimum 20% down payment for halal mortgages.

Can A Muslim Consider Mortgage In Case Of Emergency?

Is Mortgage Haram: The majority of Islamic scholars concur that conventional mortgages, which require the payment of interest, are forbidden in Islam. A conventional mortgage may, however, be acceptable in an emergency if it is the only one available and the borrower has a legitimate need for it, such as buying a primary property. This idea comes from some academics. 

It is significant to highlight that this point of view is not generally held, and it is advised that Muslims seek the advice of experienced scholars or specialists in Islamic finance in order to make an educated choice based on their unique situation and beliefs.

Islamic mortgages, on the other hand, have been created in collaboration with Muslim experts to offer a halal alternative for devout Muslims who want to buy real estate. 

Islamic mortgages cannot include the giving or receiving of interest (riba), as this is against Islamic law. Instead, a profit-sharing plan or a set charge for the use of the funds must be agreed upon by both the lender and borrower. 

The terms and conditions of the mortgage must be explicit and transparent, and the mortgage must be structured in a manner that complies with Islamic law. The borrower must have a minimum deposit, which varies based on the lender and the type of mortgage, and must have a legitimate need for the mortgage, such as buying a principal property.

Are There Any Islamic Organizations That Provide Interest-Free Loans For Emergencies?

There are Islamic institutions that offer emergency loans without interest. Here are a few instances:

  • Islamic Relief: Islamic Relief offers interest-free microloans that make use of Islamic principles of lending without interest in order to assist families in ending the cycle of poverty.
  • ShariaPortfolio: For urgent needs, ShariaPortfolio provides choices for microloans without interest.
  • Jewish Free Loan Association: The Jewish Free Loan Association, while not an Islamic organization, offers interest-free short-term loans for infertility, auto and small business loans, emergency medical and dental expenditures, and other needs. Additionally, they provide interest-free debt consolidation loans.
  • A Continuous Charity: An Islamic charity called A Continuous Charity (ACC) offers loans to deserving people and families at no charge. The loans are meant to assist people in breaking the cycle of poverty and enabling them to become self-sufficient.

Frequently Asked Questions

1. Can Muslims have a mortgage?

Islam forbids the payment of interest (riba), hence most Islamic scholars concur that Muslims are not allowed to purchase a home using a conventional mortgage arrangement.

2. Are mortgages halal in Islam?

By definition, mortgages require the payment of interest, which is haram (forbidden) in Islam.

3. Why is mortgage haram in Islam?

By their very nature, mortgages need interest payments, which are prohibited in Islam. The principles of fair commerce and wealth creation based on productive activity are violated by making money out of money or by charging interest.


Thus, the conclusion as to whether is mortgage haram can be declared as yes it is haram in its most standard manner where interest over the payable charge is applicable.

Alternative approaches to the interest problem have been created in Islamic finance, giving Muslims halal options for real estate purchases. Islamic mortgages, which are sometimes referred to as halal mortgages or home purchase plans (HPP), were created with the help of Muslim scholars. These mortgages are set up in accordance with Islamic law and don’t include paying or receiving interest.

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