Tips To Buy A Home The Halal Way
Acquiring a house is something that is coveted by everyone. No matter how small our homes are, we are more comfortable if there are no rent costs per month/year. And owning a home feels like you have put down roots.
However, annual housing costs increase each year and we should think carefully about how to finance our homes. If you want to borrow money from a bank, make sure that there is no interest upon the loan. Islamic banks do not impose interest, and interest is usury, which is forbidden in Islam.
How does an Islamic bank work?
To put it simply, one can look at the following illustration. A customer comes to an Islamic bank to purchase a particular house. The bank agrees to buy the house and to sell it to the customer at an agreed price within a predetermined time period. Additionally, the bank can sell to the prospective buyer if the house is already owned by the bank. The transaction is completed if both parties agree upon the price which includes the profit taken by the bank. This transaction is called murabaha, a sale and purchase transaction in which the benefits are agreed upon by both parties. Banks should not raise rates or impose fines even if the customer fails to pay. Customers also have the right to not buy the apartment/house if the bank provides a price that does not match the expectation of buyer before the contract of sale occurs.
What if there is no Islamic bank?
For those of you who live in Muslim minority countries, perhaps Islamic banks are not yet available in your area. What’s the solution? The following can be considered.
- Borrowing money from friends or relatives, then you pay monthly installments without interest.
- If you do not find people who are willing to lend you money, you have to set aside a percentage of money from your family’s income. Make a financial plan. Make sure the house that you want to buy is in accordance with your ability to pay. For example if you have an income of $ 3,000 per month, and you want to own a home in the next 5 years, you have to estimate the cost of the house at that time, taking into account inflation. Suppose that the current price of a house is $35,000, with inflation of 2% per year. The house price is estimated to increase $700 yearly so the house’s price in the next 5 years will approximately be $38,500. You would have to set aside at least $642 per month.
- Dr. Bilal Philips, a lecturer for islamiconlineuniversity, suggests that a way to buy a house is to build an association among Muslims who intend to buy the house. This association then collects money regularly every month from its members and determines who will get the house first. The house will belong to the association until it is paid off by the buyer.
What if already borrowing from a conventional bank?
Accordingto Sheikh Assim Al-Hakeem, if you have bought a home with a loan plus interest, and the house has been purchased, all installments having been completed, then you can still own the house and ask for forgiveness to Allah, subhanahu wa ta’ala, for all usury transactions.
However, if the loan is not yet finished being paid off, and you still have to pay the mortgage plus interest, to the extent possible, pay off all debt by borrowing from Islamic banks ( to take over credit) or from relatives and friends. If you cannot obtain a loan, you can continue the mortgage payments plus interest and ask forgiveness to Allah, subhanahu wa ta’ala, so that you can immediately pay off the debt.
Conventional bank loans are permitted only when one is forced to do so or if the individual is unable to borrow and will not be able to survive, as in an emergency. However, these loans are only for basic necessities, not exceeding, and just enough for surviving.
Surely if we have a strong intention to avoid usury, Allah will open a way out of it, inshaa’Allah.