Conventional and Islamic finance of home purchase : Islamic finance is more expensive than conventional

Fatawa Question

Asslalamu Alaikum I and my brother live in our current home with our parents. We are married and have started families. In 5 or 10 yrs. Time we will need another house therefore have taken out a conventional mortgage on a house and rented it out. The rent itself covers the mortgage most of the time. At the time there were no viable Halal mortgages. Now the Islamic Bank of Britain offers a Halal mortgage at 4.75 % rent, this is very similar to the interest charged by conventional banks. So in principal I could switch to the Islamic Bank. But they have a clause to say they can increase the rent by 2 % to 6.75 %. This is probably if government interest rates go up. If I do take this up and the rent goes up then I would be paying £ 20,000 more than a conventional fixed mortgage. I know that interest is Haram, but don't know what to do. The 2nd home is not a necessity now but will be in a number of years, and the reason we bought it now is that it will save us allot of money than buying it in 10 years’ time. Should I go for the Islamic mortgage at a potentially much higher cost or keep with the non-Islamic mortgage, or sell the house and save ourselves from Riba and hope that in 10yrs a comparable Islamic mortgage is available. Please let me know your views. Wassalam.

Fatwa

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Publication Date

2010-07-06

Main Subjects

Financial and Accounting Sciences
Islamic Studies

Topics

• Islamic jurisprudence
• Housing
• Financing
• Loans
• Purchasing
• Real property
• Commercial finance companies
• Usury
• Subprime mortgage

No. of Pages

1

Data Type

Fatawa

Language

English

Record ID

BIM-734939

• APA
• MLA
• AMA