Ruling on dealing with mortgages in a non-Muslim country

Question

We live in a western society and we live in rented accommodation so as to avoid riba. Recently we found out that there are no houses for rent, and 96% of the market is based on mortgages. All houses are offered for sale only. Some of them told me that in this situation it is permissible for me to buy a house by means of a mortgage and, moreover, it is possible to get the mortgage in the name of family insurance, so that the individual does not pay riba or a mortgage; rather it is paid by the insurance. Is it permissible to get a mortgage in the name of the family insurance, in such a way that you and other trustees or borrowers are not dealing directly with the bank and the lawyer takes care of dealing with the mortgage on your behalf?

Answer

Praise be to Allah.

A mortgage is a haraam riba-based transaction that is based on a loan with interest in which the owner of the money takes as collateral the property for the purchase of which the borrower is taking out the loan, until the debt has been paid off along with the interest (riba). If the debtor is late in making payments, then the owner of the money is entitled to sell the property and take back his money.

Some contemporary scholars have permitted this riba-based transaction if it is in a non-Muslim country and it is done in order to acquire a house in which to live. This permission is attributed to the Hanafi madhhab, and some evidence is quoted for it. But many scholars have challenged this fatwa, including Shaykh Salaah as-Saawi (may Allah preserve him) in his book Waqafaat Haadi’ah ma‘a Fatwa Ibaahat al-Qurood al-Ribawiyyah li Tamweel Shira’ al-Masaakin fi’l-Mujtama‘aat al-Gharbiyyah.

And Allah knows best.

Source: Islam QA