بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم

اَلْحَمْدُ لِلّهِ رَبِّ الْعَالَمِيْن،وَالصَّلاۃ وَالسَّلامُ عَلَی النَّبِیِّ الْکَرِيم وَعَلیٰ آله وَاَصْحَابه اَجْمَعِيْن۔

Rulings pertaining to mortgage contract

It will be helpful to know certain terms before we delve into the legal Islamic rulings pertaining to the contract or mortgage:

(1) Al-Rahin– the debtor/mortgagor: a person who leaves a thing in pawn when buying something or borrowing money

(2) Al-Murtahin– the creditor/mortgagee: a person who receives a thing as a pawned object

(3) Al-Marhun: the pawned object

Example: If a person buys rice for one thousand rupees on a deferred payment agreement and pawns his wristwatch, then the person who bought rice will be called al-rahin, the rice seller as al-murtahin and the wristwatch will be called al-marhun. Similarly, if x borrows money from y and offers his gold as security, x will be called al-rahin, y al-mutahin and the gold offered as security will be called al-marhun.

The word al-rahn literally means ‘withholding’ and as a Shariah term signifies keeping an object in pawn in lieu of a right such as debt so that the creditor may take his money back by selling it (in case the debtor fails to repay the debt). The contract takes effect once the murtahin receives the pawned object after a verbal agreement; the rahin may undo the contract as long as he has not yet handed over the security. Hence, if the rahin has taken possession of the rice or the loan and has handed over the object in pawn, the contract will be binding and he will no longer have the right to undo the deal; he can only take the pledge back after having repaid the debt or made payment for the rice.

The permissibility of conducting mortgage contract is established by the Qur’an, Sunnah and consensus of the scholars (ijma’). Allah the Exalted says: “And if you are on a journey and cannot find a scribe, then a security deposit [should be] taken.” (2:83) As for the Sunnah, it is reported that the Prophet (PBUH) bought some foodstuff on credit from a Jew and mortgaged an iron armor to him. (Ṣaḥiḥ al-Bukhari and Ṣaḥiḥ Muslim) Similarly, the Companions conducted mortgage agreements during the lifetime of the Prophet (PBUH) and he never forbade them to conduct such deals. In brief, the whole Ummah undisputedly agrees that one may contract mortgage deals whether in journey or at home with a few conditions.

Since mortgage involves debt, we should observe all the injunctions concerning borrowing or lending money as stipulated by the Qur’an in verse 282 of Surat a-Baqarah. The verse sets up clear guidelines concerning loan so as to prevent any dispute that could arise. One of the injunctions is concerning fixing a date for reimbursement of debt.

In regards with debt, we should first keep in mind that if a person asks us to lend him some money, then we should help him as it is a virtuous act and promises great reward. The scholars said that it is permissible to borrow money if one needs and it is desirable to lend to such a person so that one may be rewarded in both the worlds but, at the same time, the creditor should not seek monetary benefit by including a condition (for example, one should not make a condition of repaying one lakh twenty thousand in lieu of one lakh). However, one may demand a thing to leave in his custody as security. The debtor should try to repay the debt on time. If he finds it impossible to manage on time, he should in full honesty request the creditor to extend the term a few days before the term ends.  On the other hand, the creditor should give him respite so that he may receive a great reward from Allah, the Exalted. As for those who delay in repaying debt despite being able to do, such liars have severely been condemned and reprimanded by the Prophet (PBUH); he even refused to offer funeral prayer of a person who died without having paid his debt unless it was repaid from what he had left.

Islam lays much emphasis on creating a good society. Apparently a society lacking in mutual cooperation and goodwill for each other cannot be termed as a good one and for the very reason Islam urges people to help one another. Look at the following Ahadith of the Prophet (PBUH):

"A Muslim is a brother of (another) Muslim, he neither wrongs him nor does hand him over to one who does him wrong. If anyone fulfills his brother's needs, Allah will fulfill his needs; if one relieves a Muslim of his troubles, Allah will relieve his troubles on the Day of Resurrection; and if anyone covers up a Muslim (his sins), Allah will cover him up (his sins) on the Resurrection Day“ (Muslim)

“There is no Muslim who lends something to another Muslim twice, but it will be like giving charity once.” (Al-Nasa’i and Ibn Majah)

If a person makes an addition to the payment while repaying his debt of his own free will, it is permissible rather a proven prophetic practice  but to make a condition of increasing in payment in advance , however, is not allowed.

Some important rulings to be noted:

  • The mortgagee must return the pawned object once the mortgagor makes the payment or repays the debt. As long as the mortgagor does not make payment or repays the debt, the mortgagee shall be entitled not to return the object.
  • In case the mortgagor fails to make payment or repay the debt upon termination of the fixed period, the mortgagee shall be entitled to dispose of the pawned object to take his money back from the obtained money.
  •  If the object kept in pawn is sold for more than the actual amount of debt, the mortgagee shall take what he owns and return the rest to the mortgagor. But if the obtained price falls short of the debt, the mortgagor will be liable to pay the remaining amount.
  • If the rahin– who is the owner of the pawned object– sells out the object, the deal shall not take place except with consent of the murtahin or upon reimbursement of the debt. However, if the mortgagee agrees to the sale or the debt is paid, the deal will take effect.
  • The mortgagor shall remain entitled to the benefits and liable for the expenses of the pawned object. For example, if he leaves his cow in pawn for a debt of ten thousand rupees, he will be liable to provide fodder for the animal (for he is the owner). Similarly, he will be entitled to any benefit that comes out of it. For example, if she gives birth to a calf, it will be a property of the mortgagor.
  • For a thing to be offered as security, it must be existing at the time of the contract. Hence, it will be invalid if a person offer fruits that the trees of a certain field will bring when the season comes as security without the trees and the land.
  • If the pawned object is lost without any fault on part of the mortgagee, there can be three possible cases: (1) The pawned object and the debt have the same value (2) The value of the pawned object surpasses value of the debt (3) The value of the pawned object falls short of the debt. In case they have equal value, it will be regarded as if the murtahin has received his debt. If it has more value than the debt, the additional value will be considered to an amanah which, as per the Shariah, incurs no recompense if lost and therefore the murtahin will not be obliged to do compensate. But in case, the lost pawned object had less value as compared to the debt, the amount equal to the lost will be deducted from the debt and the murtahin will be entitled to receive only the remaining amount.

Mohammad Najeeb Qasmi (www.najeebqasmi.com)