Is It Legal to Purchase a Second Home with a Mortgage?
QuestionAssalamu Alaykum Dear respected scholar, I live in Canada and am wondering if it is permissible under Shari'ah to finance the purchase of a second home. I bought a house a few years ago to live in with my family, and now I want to buy another while renting out the first to pay off the mortgage. Is this allowed in Islam or is it considered riba (usury)? Thank you kindly.
AnswerAssalamu Alaykum Dear respected scholar, I live in Canada and am wondering if it is permissible under Shari'ah to finance the purchase of a second home. I bought a house a few years ago to live in with my family, and now I want to buy another while renting out the first to pay off the mortgage. Is this allowed in Islam or is it considered riba (usury)? Thank you kindly.
Wa Alaykum as-Salamu wa Rahmatullahi wa Barakatuh.
In The Name of Allah, Most Gracious, Most Merciful.
All Praise and Thanks are due to Allah, and peace and blessings be upon His Messenger.
In response to the question, Dr. Monzer Kahf, Professor of Islamic Economics and Finance, Istanbul Zaim University, says,
Buying a second home is an investment decision. Taking out a loan for investment purposes is in no way justified. The Qur’an mentions interest as the most despised and vicious forbidden thing. Dealing with interest may necessitate or incur a war against the person from God and His Messenger. According to the Qur’an,
﴿ٱلَّذِينَ يَأۡكُلُونَ ٱلرِّبَوٰاْ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِي يَتَخَبَّطُهُ ٱلشَّيۡطَٰنُ مِنَ ٱلۡمَسِّۚ ذَٰلِكَ بِأَنَّهُمۡ قَالُوٓاْ إِنَّمَا ٱلۡبَيۡعُ مِثۡلُ ٱلرِّبَوٰاْۗ وَأَحَلَّ ٱللَّهُ ٱلۡبَيۡعَ وَحَرَّمَ ٱلرِّبَوٰاْۚ فَمَن جَآءَهُۥ مَوۡعِظَةٞ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمۡرُهُۥٓ إِلَى ٱللَّهِۖ وَمَنۡ عَادَ فَأُوْلَـٰٓئِكَ أَصۡحَٰبُ ٱلنَّارِۖ هُمۡ فِيهَا خَٰلِدُونَ يَمۡحَقُ ٱللَّهُ ٱلرِّبَوٰاْ وَيُرۡبِي ٱلصَّدَقَٰتِۗ وَٱللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ إِنَّ ٱلَّذِينَ ءَامَنُواْ وَعَمِلُواْ ٱلصَّـٰلِحَٰتِ وَأَقَامُواْ ٱلصَّلَوٰةَ وَءَاتَوُاْ ٱلزَّكَوٰةَ لَهُمۡ أَجۡرُهُمۡ عِندَ رَبِّهِمۡ وَلَا خَوۡفٌ عَلَيۡهِمۡ وَلَا هُمۡ يَحۡزَنُونَ يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُواْ ٱتَّقُواْ ٱللَّهَ وَذَرُواْ مَا بَقِيَ مِنَ ٱلرِّبَوٰٓاْ إِن كُنتُم مُّؤۡمِنِينَ فَإِن لَّمۡ تَفۡعَلُواْ فَأۡذَنُواْ بِحَرۡبٖ مِّنَ ٱللَّهِ وَرَسُولِهِۦۖ وَإِن تُبۡتُمۡ فَلَكُمۡ رُءُوسُ أَمۡوَٰلِكُمۡ لَا تَظۡلِمُونَ وَلَا تُظۡلَمُونَ ﴾
((275) Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.
(276) Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.
(277) Indeed, those who believe and do righteous deeds and establish prayer and give zakah will have their reward with their Lord, and there will be no fear concerning them, nor will they grieve.
(278) O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers.
(279) And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal – [thus] you do no wrong, nor are you wronged.)
— (al-Baqarah 2: 275-279)
It is only for necessities, such as buying a house to live in in order to be stable, live reasonably, and preserve your property. It is necessary to purchase a home to live in if you do not have another place to live. Purchasing a second home as an investment, especially if you intend to rent out the first, is not permitted.
What exactly does it mean to rent out the first house? This means you are turning it into an investment property rather than a residence. The concession that could be made is one mentioned in the Qur’an for cases of genuine need, a genuine kind of necessity. It is not necessarily a life and death necessity, but it is a reasonable necessity. Why should there be a concession of the original text of the prohibition of riba (usury) when there is no reasonable necessity?
Unfortunately, we live in a society that is plagued by riba, which may even incur the wrath of Allah SWT. That is why we do not want to be too indulgent in usury.
Allah Almighty knows best.