Can You Buy a House with an Interest-Based Loan If Necessary?

Answered by Shaykh Dr. Muhammad Abu Bakr Badhib

Question

Is it permissible to buy a house with interest-based loans in case of necessity?

Answer

In the name of Allah, and all praise is due to Allah, and blessings and peace be upon our master Muhammad, the Messenger of Allah, his Family, his Companions, and those who follow him.

The Prohibition of Usury (Riba) in Islam

Islam unequivocally prohibits usury (riba), as highlighted in the verses of the Noble Quran and the Sunna of the Master of the Messengers (Allah bless him and give him peace). Allah (Most High) says:

“O believers! Fear Allah, and give up outstanding interest if you are (true) believers. If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm.” [Quran, 2:278-279]

Jabir (Allah be pleased with him) reported that the Messenger of Allah (Allah bless him and give him peace) cursed the one who consumes usury, the one who pays it, the one who writes it down, and the two who witness it, and he said: “They are all equal” [Muslim]

The Ruling on Consuming Usury

This is the ruling on consuming usury and the paths leading to it. With changing times, increasing needs, and varying lifestyles, Satan spreads his snares and entices people, making forbidden things appear permissible in the guise of necessity. A Muslim may weaken in the face of life’s temptations and fall into what is religiously forbidden, seeking Allah’s protection and well-being.

Buying houses is not considered a necessity, as one can live in rented accommodation, which is the case for most people in the past and present, especially in major cities where rental units are available at different prices to suit various situations. If this is the case, there is no need for a Muslim to delve into forbidden matters and engage in questionable actions.

The Principle of Necessity

However, some scholars argue that if the situation reaches the level of necessity, where the life of the borrower is at stake without the loan, then the principle of “necessities permit the forbidden” applies.

Imam Zarkashi said: “Necessity: reaching a point where if the forbidden is not consumed, one would perish or be close to it, such as one who is forced to eat or wear clothes to the extent that if he remains hungry or unclothed, he would die or lose a limb, this permits consuming the forbidden. Need: like the hungry person who, if he does not find something to eat, would not perish but would be in difficulty and hardship, this does not permit the forbidden.” [Zarkashi, al-Manthur fi al-Qawa’id]

Similar to necessity is coercion, as the basis for it is in Allah’s saying:

“But if someone is compelled by necessity—neither driven by desire nor exceeding immediate need—they will not be sinful. Surely Allah is All-Forgiving, Most Merciful.” [Quran, 2:173],

And His saying, “He has already explained to you what He has forbidden to you—except when compelled by necessity.” [Quran, 6:119]

Fatwas and Scholarly Opinions

Majma‘ al-Buhuth al-Islami bi al-Qahira issued a fatwa in its second conference held in Muharram 1385 AH / May 1965 CE, stating:

“Interest on all types of loans is usury and is forbidden, whether it is called a consumer loan or a productive (exploitative) loan. Much and little usury is forbidden, and lending with usury is forbidden, not allowed by need or necessity, and borrowing with usury is likewise, and its sin is only removed if necessity compels it, and everyone is left to his own judgment in estimating necessity.”

“It is permissible for one in necessity to deal with usury due to necessity; the lender sins, not the borrower.” [al-Mawsua‘ al-Fiqhiyya al-Kuwaytiyya]

It should be noted that many have overly expanded the concept of necessity regarding interest-based loans, considering the purchase of a house, a car, changing home furniture, or buying a mobile phone as necessities, which they are not.

Unfortunately, there are those who issue fatwas permitting such things, stemming from a misunderstanding of what constitutes necessity. Islamic law provides many alternatives, including interest-free loans from individuals, buying goods in installments, and selling them for cash, among other methods that can be understood from their respective contexts.

Contemporary Context and Disputes

These situations are common in Western countries, and the demand for solutions to this phenomenon is increasing. It is useful to know that in the year 1420 AH / 1999 CE, a fatwa was issued by both the European Council for Fatwa and Research and the Conference of the Shari‘a Scholars Association of North America, permitting Muslims residing in Europe and the United States to take interest-based loans to buy homes.

This fatwa was challenged by other scholars and Islamic bodies, and a decision was issued to nullify it by the Islamic Fiqh Academy of the Organization of Islamic Cooperation during its fourth regular session in Ireland in Rajab 1420 AH / October 1999 CE. The decision concluded:

“Those who signed this academic opposition believe that buying houses with interest-based loans in Europe is not a necessity, nor does it fulfill a need that reaches the level of necessity. They view this method as religiously forbidden and should only be considered if a person cannot find a suitable rental property, does not have the money to buy that property, cannot find an interest-free loan, or cannot find another legitimate means to assist in the purchase, such as murabaha sales where the increase in price is in exchange for delayed payment. Additionally, the house purchased should not exceed the basic need, such as having more rooms and amenities than necessary or having high specifications requiring an amount beyond the necessity.” [Sawi, Waqafat Hadi’a]

Conclusion

In conclusion, a Muslim must avoid doubtful matters and not be lenient in taking concessions and fatwas that permit forbidden actions, regardless of their source.

They should prioritize piety and fear of Allah before proceeding. As for the “compelled” person under the conditions mentioned, if they follow the opinion that permits interest-based loans, they must understand that alongside the principle of “necessities permit the forbidden,” there is another principle that states: “necessity is estimated according to its extent.”

Therefore, the borrower should not take more than needed and should not expand on buying household luxuries, as this is not part of the necessities.

The compelled borrower must also hasten to repay the loan to the bank to avoid accumulating interest. This is all under the condition of necessity.

Otherwise, the Muslim, confident in Allah’s promise, should be patient, turn to Allah, and supplicate for their needs to be met in a way that pleases Him.

Allah (Most High) says, “And whoever is mindful of Allah, He will make a way out for them, and provide for them from sources they could never imagine. And whoever puts their trust in Allah, then He (alone) is sufficient for them. Certainly Allah achieves His Will. Allah has already set a destiny for everything.” [Quran, 65:2-3]

We ask Allah (Most High) to aid the Muslims and grant them gentleness and well-being in their religion in both worlds. All praise is due to Allah.

And Allah is the best Guide.

[Shaykh] Dr. Muhammad Abu Bakr Badhib