Buying A House In The West

[gajarkahalva]

Salaamun Alaikum, 

 

How does one go about buying a house here in the West? Given that most people do not have the full amount of cash to buy a house outright, how can one go about owning a house without getting a mortgage?

 

I have seen the fatwa's that say you can get a mortgage as long as you have the intention of not paying the interest or something along those lines. But i can't see how you can actually get a mortgage and intend on not paying the interest. When you are taking the mortgage, you already know that you will have to pay the interest and you will obviously be intending to pay it - you can't lie to yourself!

 

So, any novel ideas on how to own a home? 

 

I think there should be some central shia house buying thing set up, where they lend people money to buy a house and do not charge interest. E.g. They lend 100000, and then the borrower has to pay back 110000, so 10000 is the fee that they charge. I guess this should be ok? If only..............

[Martyrdom]

its pure rip off a house will cost 300 thousand but you will pay 500 thousand. They will add 200 thousand interest only. And your first several payments goes toward interest not even your house. If you can't buy it straight off then rent .

[Little_Socrates]

(bismillah)

  (salam)

 

It is most definetly possible to buy a house in Cash if you have a decent down payment. Otherwise as Martyrdom stated, if you cannot buy it straight up, rent. 

 

(wasalam)

[notme]

I don't understand these words that say don't intend to pay interest even knowing you will have to do it, then pay it anyway because you have to. What is that? Self deception?

If you weren't making a mortgage payment you would be paying rent. If you are making mortgage payments, you do not own the house. I repeat - and I know this firsthand - you do not own the house. The bank owns the house and you give them a monthly payment. How is this different from renting?

The only difference is if you are still alive and living in the same place in 30 years you will own the house then. Rather than attempt at self deception, just think of your final payment as the purchase price for the house you have been renting for 30 years.

[gajarkahalva]

What alternatives are there to renting?

Can some sort of shia organusation not be set up that facilitates or enables people to buy their own properties here in the west? Through giving interest free loans or something. Theres plenty of cash in the shia world.....

I have heard people say that ownership is encouraged in Islam. So when it comes to housing, how can this be acheived in the west where the vast majority of people cannot purchase outright?

[David66]

Hello,

 

I have owned several homes in the U.S.  And, they have all been good investments.  Most lenders are requiring a 20 percent down payment.  But, in some places, prices are still considered low.  But, who knows, real estate values fluctuate.  And, interest rates are low.

 

Also, I forget what the break point is.  But, if you plan to own the home less than a year it is probably better to rent.  But, if you make improvements to the home and real estate prices go up you could do well.  It is an investment, sometimes you make money, sometimes you loose.

 

I would not shop for real estate from afar.  If you are new to an area, get a 6 - 12 month lease and learn the market.  For my purchases, I knew more or as much as the realtors.

 

^^ Yes you do own the property.  You own the property but the lender holds a lien against it.  You are free to improve the property, can you do this with a rental?  You can rent the property.  Can you do this with a rental?  Usually not.  You can sell the property.  Can you do this with a rental? 

 

All the Best,

David

Edited March 10, 2014 by David66

[Little_Socrates]

I have heard people say that ownership is encouraged in Islam. So when it comes to housing, how can this be acheived in the west where the vast majority of people cannot purchase outright?

 

The mistake most people in the west tend to make is that they rush into buying something without thinking. When they see a house that they really really like, they do not have any second thoughts about the mortgage and debt to income ratio. If everyone lived within their means, there would not be any housing crisis in the western countries. 

 

To purchase a Home you need a down payment. How much your down payment is, is a factor in determining what you can and cannot afford. Again, sometimes you can purchase a home in cash with your down payment money but there is also benefits of having a set mortgage. You also have to look at the market in which you are buying the house. In San Diego, California for example the price of a nice Four bedroom Three and a Half Bath home in a posh neighborhood will run in the high 700's minimum. Compare that to a market like Temecuela or Murrieta which are near by, you can get the same type of house in a similar setting for less than half the price.  So yes it does vary alot by the market and region you are looking to buy in.

 

 

^^ Yes you do own the property.  You own the property but the lender holds a lien against it.  You are free to improve the property, can you do this with a rental?  You can rent the property.  Can you do this with a rental?  Usually not.  You can sell the property.  Can you do this with a rental? 

 

Lol technically you cannot actually own a property in the West. Remember even if the mortgage is paid off, it is still not yours. You still are required to pay property taxes on the house. If you do not, then they will take your house. :)

 

 

-Socrates 

[Auqab]

Salaamun Alaikum, 

 

How does one go about buying a house here in the West? Given that most people do not have the full amount of cash to buy a house outright, how can one go about owning a house without getting a mortgage?

 

I have seen the fatwa's that say you can get a mortgage as long as you have the intention of not paying the interest or something along those lines. But i can't see how you can actually get a mortgage and intend on not paying the interest. When you are taking the mortgage, you already know that you will have to pay the interest and you will obviously be intending to pay it - you can't lie to yourself!

 

So, any novel ideas on how to own a home? 

 

I think there should be some central shia house buying thing set up, where they lend people money to buy a house and do not charge interest. E.g. They lend 100000, and then the borrower has to pay back 110000, so 10000 is the fee that they charge. I guess this should be ok? If only..............

 

 

There is sharia home financing.

 

http://halalinc.com/

[notme]

^^ Yes you do own the property. You own the property but the lender holds a lien against it. You are free to improve the property, can you do this with a rental? You can rent the property. Can you do this with a rental? Usually not. You can sell the property. Can you do this with a rental?

David, I'm afraid I didn't communicate my point well.

People are fretting that interest is haram. I ask "How is rent better than mortgage?" With both you pay to use the house. With both if you do not pay you will be evicted.

Details are different in most cases, but certainly there are exceptions to everything. I have known renters who made home improvements with landlord approval and mortgage payers who could not due to restrictive covenants.

I'm suggesting people do what works best for them and not bother with trying to rationalize doing something they believe to be haram.

[kbsquare]

The mistake most people in the west tend to make is that they rush into buying something without thinking. When they see a house that they really really like, they do not have any second thoughts about the mortgage and debt to income ratio. If everyone lived within their means, there would not be any housing crisis in the western countries.

To purchase a Home you need a down payment. How much your down payment is, is a factor in determining what you can and cannot afford. Again, sometimes you can purchase a home in cash with your down payment money but there is also benefits of having a set mortgage. You also have to look at the market in which you are buying the house. In San Diego, California for example the price of a nice Four bedroom Three and a Half Bath home in a posh neighborhood will run in the high 700's minimum. Compare that to a market like Temecuela or Murrieta which are near by, you can get the same type of house in a similar setting for less than half the price. So yes it does vary alot by the market and region you are looking to buy in.

Lol technically you cannot actually own a property in the West. Remember even if the mortgage is paid off, it is still not yours. You still are required to pay property taxes on the house. If you do not, then they will take your house. :)

-Socrates

True dat. I bought my first home when I was 18 and paying 5000 yearly property tax now I have paid the same in taxes as I did buying the home!

[kim.tinkerbell]

I want my own house too. I too dont understand this ruling of not paying back interest. It makes zero sense. In the west you get interest on everything, even uni fees. I took a loan and I know my loan is doubled by now,lol. But how can you pay it off if your not making much?

You only get three times of your salary, its not enough if you dont have a great job.

I agree with you gajer, they should have a system to help us.

Salams

[notme]

"Islamic" banking exists, but it costs more than a conventional mortgage.

[gajarkahalva]

Islamic banking is not really islamic either though. They just give another name to interest. So mortgages and islamic finance are both haram it appears.

Looks like rent is the only option for the average person then.

[aburayhanah]

I don't understand these words that say don't intend to pay interest even knowing you will have to do it, then pay it anyway because you have to. What is that? Self deception?

 

It is not self deception. Here is the Fatwa of Sayyid Sistani: 

 

Question: Banks in the West give loans —known as mortgage— to those who do not have enough money to buy houses; this is to be paid back in [weekly or monthly] instalments with a high rate of interest. Is a Muslim allowed to use this facility? If it is not permissible, is there a solution in your view for someone who claims that he needs the mortgage to buy his own residential house and does not possess enough money to pay for it?

 

Answer: It is permissible to take the money from the bank that is financed by non-Muslim government or private funds but not with the intention of loan. The knowledge that the bank will sooner or later force him to pay the capital as well as the interest does not affect [the lawfulness of] his taking the money.

 

I think you need to read this carefully. This does not contradict. It means you do not want to pay interest, but you are forced to pay it and you re paying it unwillingly. in other words, if the interest was not necessary, you would not pay it. 

Let me explain it in an example:

Suppose that you are unwilling to take a medicine. But for a reason you have to take it. Since you are obliged, you are taking that medicine while you do not want it.

[notme]

It is self deception.

Nobody needs to own a house in order to shelter and protect his family.

It is possible to save up enough to buy a house without a loan - difficult, but possible.

If you know that accepting money from a bank is a loan and you know this loan will have interest, to claim that you do not intend to pay it back is either self deception if you actually do intend to pay it back and continue to live in or manage the house, or it is criminal fraud if you sign agreeing to loan conditions with no intent to repay with the given conditions.

That having been said, paying a bank for a house that you will someday own is not worse than paying a landlord rent and getting only temporary shelter.

[Mushkil Kusha]

^ How are you claiming an Ayatullahs fatwa self deception? Just because you don't understand the law that doesn't mean you go around flaunting your own. Let me guess, you know more than the many Ayatullahs who gave the permissibility of borrowing for mortgage? How do you think imam barghas operate in the west? 

 

OP, mortgage is allowed in the west as per many fatwas given by our marja'i, you have to have the niyah of Securing the money, In our deen, many things are done with niyah so its really important one has this niyah. Sayyid Sistani (ha) answers this in the following

 

You can receive the money not with the intention of borrowing it rather with the intention of securing the money (from their hands). (Here, it means that the intention you have is very important).

Edited March 11, 2014 by Mushkil Kusha

[notme]

^No need to get angry - I stated from the start that I don't understand these words. Then I went on to offer a different explanation with the same conclusion as the confusing one.

Please explain to me how a person can sign legally binding documents agreeing to repay without the intention of repaying without committing fraud. I accept that mortgages are allowed, I just don't understand this reasoning.

The banks in the US will not force anyone to pay back his mortgage. If he chooses to not pay, it will be the same as if he is unable to pay: he will be evicted. Then he can live somewhere else, but it will probably be many years before he will be allowed to take another mortgage. So what is meant by "knowing he will be forced to pay"?

[David66]

 

 

I agree with you gajer, they should have a system to help us.

 

 

Hello Kim Tinkerbell,

 

Please loan me $100.  In thirty years, 2044, I will re-pay you $100.  Does that sound like a good deal?

 

All the Best,

David

[Mushkil Kusha]

^No need to get angry - I stated from the start that I don't understand these words. Then I went on to offer a different explanation with the same conclusion as the confusing one.

Please explain to me how a person can sign legally binding documents agreeing to repay without the intention of repaying without committing fraud. I accept that mortgages are allowed, I just don't understand this reasoning.

The banks in the US will not force anyone to pay back his mortgage. If he chooses to not pay, it will be the same as if he is unable to pay: he will be evicted. Then he can live somewhere else, but it will probably be many years before he will be allowed to take another mortgage. So what is meant by "knowing he will be forced to pay"?

 

I'm not angry at all. If you don't understand those words then how do you keep coming to the conclusion that its self deception? What you're missing here is that your intention (niyah) regarding the loan is for Allah swt not for banks or lenders. When a bank approves your mortgage for say $500,000 with fixed or variable interest, your mortgage papers will say how much interest you will be paying for your fixed or variable term over 25-30, so lets say total interest would be $200,000. Your intention(niyah) to Allah swt will be that you are securing this money, the total $700,000 from the lenders to buy a home in the west where there is no sharia law. If you take this money to do business and make profit then it is condemned by Allah swt in Quran.

Edited March 11, 2014 by Mushkil Kusha

[hasanhh]

(salam)

 

Find your own real estate agent --one should be in the mosque.

 

Be sure to have the house inspected. Your agent will explain this.

 

Never, never, buy too much house.

 

Your three best options are: 20% down-30 year; 20% down, 15 year; or cash payment in full.

 

Estimate that your cost of owning is 150% of the mortgage payment.

 

Use only a fixed-rate loan. Never anything else --unless you want to lose your money a few years down-the-road.

 

Your cost of heating the place is a big consideration. Oil heat is the best.

 

Never buy a house that sits lower than the road.

 

Never buy a newly constructed house. New houses need a lot of repairs and re-do.

 

Try a house built about 1980 or before. If it is brick, check the windows for rust.

Edited March 11, 2014 by hasanhh

[gajarkahalva]

I'm not angry at all. If you don't understand those words then how do you keep coming to the conclusion that its self deception? What you're missing here is that your intention (niyah) regarding the loan is for Allah swt not for banks or lenders. When a bank approves your mortgage for say $500,000 with fixed or variable interest, your mortgage papers will say how much interest you will be paying for your fixed or variable term over 25-30, so lets say total interest would be $200,000. Your intention(niyah) to Allah swt will be that you are securing this money, the total $700,000 from the lenders to buy a home in the west where there is no sharia law. If you take this money to do business and make profit then it is condemned by Allah swt in Quran.

 

When you take the money from the bank, say £100,000 - your intention would be to get the money, but in your head you will know you have to pay interest and therefore you will knowingly be paying interest. Because of the variable rate of interest you will not know the final amount payable, so how can you intend to borrow say £180,000 (which is the estimated final payment) when they have only actually given you £100,00? Going into the transaction from the start, you will know you will be paying interest - so it does seem like self deception.............maybe you can explain it with an actual example so that i can understand it better.

 

Or is what you are basically saying is that if you know what the final payment is, you intention should be that you are borrowing that final amount, rather than the actual amount you received?

Hello Kim Tinkerbell,

 

Please loan me $100.  In thirty years, 2044, I will re-pay you $100.  Does that sound like a good deal?

 

All the Best,

David

You know yourself that is stupid.

 

Something could be set up as non-profit. An organisation loans you 1000, specifically for a house over 10 years. You pay back 1000, plus some admin fees which are fixed. E.g. you pay 110 a year (100 towards the loan, 10 towards the admin), So you end up paying back 1100. Just an example.

[notme]

Short answer: mortgages are permitted according to many or most marjae.

If you go any deeper than that it gets very confusing. If you want to buy a house, do it wisely. Hasanhh gives some good advice. Also be aware that old houses are great, but can have quirks. Keep an eye out for outdated electrical systems. Plan for routine repair and maintenance costs. As stated before, don't buy more house than you need, even if you can.

[David66]

Hello,

 

^^ No, not stupid at all.  Just a graphic example of why you don't get to use other peoples money for free.  There are organizations that give money for free but they are known as charities.    When people take risk with their assets they expect a return.  Otherwise, there is no reason to take the risk.

 

All the Best,

David

[kim.tinkerbell]

Hello Kim Tinkerbell,

 

Please loan me $100.  In thirty years, 2044, I will re-pay you $100.  Does that sound like a good deal?

 

All the Best,

David

Hey david,

It's a good deal for the person that is getting the money, but not a great deal for the loaner. I think they should just lower the interest a bit, it's just a ripe off.

[FisherKing]

Hey david,

It's a good deal for the person that is getting the money, but not a great deal for the loaner. I think they should just lower the interest a bit, it's just a ripe off.

 

 

Hello Kim Tinkerbell,

 

Please loan me $100.  In thirty years, 2044, I will re-pay you $100.  Does that sound like a good deal?

 

All the Best,

David

 

My Dear Brothers and Sisters,

 

I believe the correct term is Inflation. :)

[hasanhh]

(salam)

 

I know I read the hadith that Umar said he wished he had asked Muhammad(s.a.w.s.) more about riba.

 

I have kept this is mind over the years as I watched the effects of interest rates.

 

The observation I have is that you can rent land for money. Rent a house for money. And other similar stuff.

 

So the Queston becomes: How do you rent money in such a way that it doesn't become riba ?

Edited March 12, 2014 by hasanhh