I live in UK in a house for which I pay mortgage. From the Islamic point of view would I be justified in buying another house on mortgage purely for business purposes?
Buying a house on mortgage is a kind of debt financing (i.e. getting a loan to finance one’s needs). In the present economic structures, debt financing, generally, entails the element of interest. As I have stated in my earlier responses to similar question, the Shari`ah unequivocally prohibits taking interest. Payment of interest, being a transaction, cannot be without the element of taking interest by one of the parties to the transaction. In other words, it cannot be that a party is paying interest, yet no one is receiving it. The receiver of interest is doing something, which is strictly prohibited in Islam and is, thus, committing a grave sin. The payer of interest, on the other hand, is being a party to the sin of the receiver. The Shari`ah has directed us to not only refrain from directly committing a sin, but also from extending our cooperation in the sin of another person1). The Qur’an says:
Cooperate with each other in matters of obedience and piety; Do not cooperate with each other in matters of sin and transgression. (Al-Maaidah 5: 2)
Keeping this explanation in perspective, it should be clear that a Muslim should try his utmost to avoid being a direct or even an indirect party to an act disobedience and sin.
There may be circumstances in which a person is forced into becoming a party to the sin of another person. For example, where a person has no other option but to fulfill any of his pressing needs through an interest-bearing loan. Under such circumstances, it may be hoped that God shall forgive such a person, for being a source of earning interest for the lender, due to his circumstances. Nevertheless, where a person could easily have done without resorting to an interest-bearing loan, he may on the Day of Judgment, be held responsible for being a party to the receiver’s sin, in such circumstances where he could easily have avoided it.
The decision regarding whether or not should one resort to taking an interest-bearing loan and, thereby, becoming a party to the sin of the receiver of interest, should be taken in the light of the given explanation. If one truly feels that his particular circumstances and needs shall provide him an excuse for cooperating in the sin of the receiver of interest, he may then resort to taking the loan; while if he feels that his circumstances is not pressing him to justify such a cooperation in sin, he should then avoid benefiting from the loan and be informed of the great rewards that shall await him in the hereafter.
In my opinion, however, constructing or buying a house for commercial purposes should not be considered as a ‘pressing need’ of a person. I would, therefore, not approve of taking an interest-bearing loan for the stated purpose.
I hope this helps.
January 28, 2001
- According to my revised opinion, taking a loan on interest and subsequently paying the contracted interest does not fall under the category of cooperating in the sin of the person taking interest. The sin of cooperation in sin would, for instance, be for a person who, by the willingness of his heart, works for one who is taking interest, not on the borrower. The only point of consideration for the borrower is the liability that is being incurred by the loan or the debt-financing in question. Every person must try to make sure that he is clear of financial liabilities, as far as possible. Any liabilities not cleared during the life of this world will have to be cleared on the Day of Judgment, when a person would have nothing else to settle the claim of others, except his good deeds. (Moiz Amjad, April 29, 2006 [↩]