Sunday, July 14, 2024
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Taking conventional mortgage and then refinancing

Fatwaa ID: 1420

Assalamualikum warahmatullah wabarakatuh
Eid Mubarak! I pray you and your family well. I have private question i wanted to ask. A few people in my extended family is trying to buy commercial property together. To be exact, there are 12 shares to buy the property. Everyone interested would buy out a share and all the share adds upto the down payment of the property ~ 35%. The rest would ended to be bought with loan/financing. I was informed only recently, but there is an urgent deadline to buy this by July 13th. My cousin who is managing this already went through the banking and verification process just needs to close the deal. I told her about UIF and we got in touch with them. A the only thing is UIF can’t close by this date and is asking for more down payment and other cost. Would it be halal to buy the property like this then refinance once the property is owned? Refinancing seems to be a easier and faster optoon
The entire property will be under a LLC and each shareholder have their own name and share under it. So if I buy a share, I am fully buying my portion out. My cousin is the one that would deal with the mortgage( she plans to pay it with the rental income of the property).
Regardless, I would have no association with financing. I pay out my portion of the share, and will receive profit if the property gains sold based on the number of shares I hold.InshaaAllah refinancing switch UIF can be done as soon as possible. But until then will it be permissible for me to invest in this?
JazakAllah Khair

In the Name of Allaah, the Most Gracious, the Most Merciful.
As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

We take note of the details of your query. We understand that the above is a partnership. Thus, the doing of one on behalf of the corporation is in fact the doing of each partner. Each partner represents the other partners. Thus, while you claim that you have nothing to do with the financing, that is not correct. You are equally responsible for the financing as a partner.

Although the corporation intends to get refinanced afterwards through an Islamic financing scheme, it will not be permissible to initially take a conventional mortgage. You will end up paying interest/riba. That is a major sin. Similarly, you will be voluntarily entering into a haraam agreement. That too is impermissible.

Accordingly, it will not be permissible for you to join the venture in question. You must also discourage the other partners from joining and remind them of their accountability to Allaah Ta’aala. Consider Shari’ah compliant avenues and ventures. You are not in a rush. Other opportunities will surely come.

A venture entered while violating the laws of Allaah Ta’aala will never bring about khayr and barakah. It will only be a means of regret and remorse in this world and the next. If you avoid the haraam for Allaah Ta’aala, He will surely grant you something better. We do not need abundance of wealth. We need barakah in the wealth Allaah Ta’aala has given us.

And Allaah Ta’aala knows best.
Mufti Muajul I. Chowdhury
Darul Iftaa New York

12/18/1444 AH – 07/06/2023 CE

وصل اللهم وسلم وبارك على سيدنا محمد وعلى ءاله وصحبه أجمعين


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