Purchased a House Through a Conventional Loan with a Fixed Monthly Payment Fatwa No: 465052
- Fatwa Date:16-10-2022 - Rabee' Al-Awwal 21, 1444
I purchased a house beginning of 2022 through a conventional loan with a fixed monthly payment for 15 years, I put 20% down payment and the bank 80%. If this is haram, can I pay the full amount left on it now and be done with it? Should I give sadaqah out for thinking that it was permissible? Or would this be considered breaking the fixed monthly installment contract I agreed to before purchasing the house and I should continue with the monthly payments? Can you please explain the concept of why it's haram even though there was an agreement contract regarding how much of a monthly installment I would be paying back before I possessed the property?
All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.
Based on your question, we understand that you have bought a house and paid its cost, as follows: you paid 20% of its price from your own money and borrowed the remaining 80% from the bank on condition that you would pay this debt back in installments with a usurious interest you agreed upon. As such, in case you borrowed one million US dollars from the bank, and you agreed to pay it back 1,500,000 US dollars in installments over fifteen years, this is totally prohibited since it is considered a usurious loan. Taking out usurious loans is a major sin that is not allowed even for the sake of owning a house in case there is the possibility to rent one. However, if it is impossible to rent a house, and the person was thus afflicted with great hardship that could not be solved except through the usurious loan, it is permissible then to take out this loan relying on the maxim that "necessities render prohibitions permissible.”
As for your paying of the installments now, it is permissible. In addition, if paying them now would waive an amount of them or even reduce them, you should hasten to pay them if you can do so.
As long as you were ignorant of the prohibition of this usurious loan, we hope you would be pardoned for it, and you are not obliged to give out charity because of this loan in all cases.
Allah knows best.
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