What Is the Difference Between a Mortgage and a Rent-To-Own?

Answered by Shaykh Abdul-Rahim Reasat

Question: Assalamu alaykum

In a mortgage, the bank buys a house in my name and I pay the bank the principal plus interest for using their money. On the other hand, in rent to own, the bank buys the property in their name and I pay them rent which includes the principal and the mark-up (interest). In essence, these two are the same so why is one seen as haram and the other halal?

A scholar has the opinion that the former is technically halal as the essence is the same.

Answer: Wa ‘alaykum as-salam wa rahmatullah wa barakatuh

I pray you are well.

Giving Interest Is As Wrong As Taking It

The premise that only taking interest is impermissible is incorrect, and it directly clashes with the narration ‘The Messenger of Allah (Allah bless him and give him peace) cursed the one takes interest, the one who gives it, the one who writes [the contract], and those who witness it.’ (Muslim).

‘Islamic Mortgages’

The conventional mortgage and the ‘Islamic alternative’ are two different contracts. The former is clearly one where the buyer pays back more than he borrows, falling into the problem in the above narration. In rent-to-own alternative, the buyer owns part of the property, and the bank owns the rest.

The buyer then has two agreements with the bank: the first is to pay a sum per month as rent for living in the share owned by the bank; this is permissible in the Shariʿa, and not interest. The second agreement is to purchase some of the banks share every month over a number of years until he is the sole owner. This is also permissible in the Shariʿa.

A simple look at the outcomes of the two transaction seems like the buyer is getting money from the bank and paying more back. This is a over-simplification and incorrect.

The Implications of words

The wordings and their meanings in legal contracts have consequences and sanctity in the eyes of Allah Almighty. Otherwise, what would be the difference between a man marrying a lady with a mahr and marriage contract and then consummating that marriage, and a man who made an agreement with a lady, paid her some money and slept with her outside of marriage? An over-simplification would say that both are the same.

The jurists summed this up with the legal maxim ‘In contracts the meanings are of consequence, not just the wordings.’ (Zarqa,Sharḥ al-Qawaʾid al-fiqhiyya)

I hope that clarifies matters for you.

Wassalam,
[Shaykh] Abdul-Rahim Reasat

Shaykh Abdul-Rahim Reasat began his studies in Arabic Grammar and Morphology in 2005. After graduating with a degree in English and History he moved to Damascus in 2007 to study and sit at the feet of some of the most erudite scholars of our time.

Over the following eighteen months he studied a traditional curriculum, studying with scholars such as Shaykh Adnan Darwish, Shaykh Abdurrahman Arjan, Shaykh Hussain Darwish and Shaykh Muhammad Darwish.

In late 2008 he moved to Amman, Jordan, where he continued his studies for the next six years, in Fiqh, Usul al-Fiqh, Theology, Hadith Methodology and Commentary, Shama’il, and Logic with teachers such as Dr Ashraf Muneeb, Dr Salah Abu’l-Hajj, Dr Hamza al-Bakri, Shaykh Ahmad Hasanat, Dr Mansur Abu Zina amongst others. He was also given two licences of mastery in the science of Qur’anic recital by Shakh Samir Jabr and Shaykh Yahya Qandil.

His true passion, however, arose in the presence of Shaykh Ali Hani, considered by many to be one of the foremost tafsir scholars of our time who provided him with the keys to the vast knowledge of the Quran. With Shaykh Ali, he was able to study an extensive curriculum of Qur’anic Sciences, Tafsir, Arabic Grammar, and Rhetoric.

When he finally left Jordan for the UK in 2014, Shaykh Ali gave him his distinct blessing and still recommends students in the UK to seek out Shaykh Abdul-Rahim for Quranic studies. Since his return he has trained as a therapist and has helped a number of people overcome emotional and psychosomatic issues. He is a keen promoter of emotional and mental health.