Re: Question regarding Mortgage???????
and if that $1000 were spent on a business, should I get a share in the profit? Is Loaning = investing?
Peace Robert
In Islam these two are different things. If a loan was given on the basis of a term fixed pay back then that is what it should be. If investment money was given then the profit should have been agreed in the initial contract, in which case possibilty of loss will also be there too.
Re: Question regarding Mortgage???????
If you ask people you would end up confused. Do what your own heart tells you. My logic to get a traditional mortgage from a USA bank is this. Quran prohibits the money lenders to accept riba/interest. Quran has condemned the money lenders to accept riba/interest which is interest. Quran has encouraged people with money to engage in the practice of buying and selling. Nowhere in Quran people who are forced to pay interest by money lenders have been condemned . That tells me that Quran understand that there will be situations where people will be forced to pay interest by people who have money . The people with money have been given a better alternative of using their money for trading purposes instead they use it for earning interest . They choose not to use their money for trading. The builders who build house do not engage in the practice of selling the house at easy installment. These builders insist that you get money from a money lender to pay the builder in this situation the people have no option other than borrowing money on interest to fulfill their basic need of having a shelter for their family . Now people will prove to you from hadees that paying interest is also haram. But the basic principle I follow is that the thing which is not proved haram from Quran then it is not haram. Quran has questioned Rasool Alllah ( SAW) in surah Tahreem for making something haram for himself which Allah did not make haram for him, Then how can Allah give His Rasool ( SAW) the authority of making things haram for masses which Allah Himself did not make haram for them. This is the translation of text of the Surah Tahrim: 66 verse 1. The actual words used are taharam meaning "you make it haram" and ahala meaning "made halal"]يَـٰٓأَيُّہَا ٱلنَّبِىُّ لِمَ تُحَرِّمُ مَآ أَحَلَّ ٱللَّهُ لَكَۖ تَبۡتَغِى مَرۡضَاتَ أَزۡوَٲجِكَۚ وَٱللَّهُ غَفُورٌ۬ رَّحِيمٌ۬ 066.001 * **YUSUFALI:* O Prophet! Why holdest thou to be forbidden that which Allah has made lawful to thee? Thou seekest to please thy consorts. But Allah is Oft-Forgiving, Most Merciful. PICKTHAL: O Prophet! Why bannest thou that which Allah hath made lawful for thee, seeking to please thy wives? And Allah is Forgiving, Merciful. SHAKIR: O Prophet! why do you forbid (yourself) that which Allah has made lawful for you; you seek to please your wives; and Allah is Forgiving, Merciful. *066.001 *
Peace Mirch
There are plenty of hadith to justify the give and take of interest are both not allowed. Dispensation has been made on country laws, but everything should be done to avoid interest. Some people say that it is okay for them to have high interest savings accounts because they will cancel the interest they are paying out with the interest they gain in the account. This will not be counted as a cancelling rather it will be considered the indulgence in usury twice over.
Some people accept interest and give it in charity, but this problematic too because puts into circulation an artificial amount of value of wealth that does not really exist.
Re: Question regarding Mortgage???
I would be disagreeing with a lot of this in this post Akhi.
Being on charitable basis does not invalidate it being returned as it was borrowed Akhi. Inflation is a concept that comes with paper money. Its synonomous to the supply and demand of paper money as an exchange medium just as there is a supply/demand for other traded goods. Inflation is very real. The reason we have paper money is because it is used as a common medium for exchange of goods and also provides the purchasing power for other goods unlike the barter trade of centuries past. Not everyone has a demand for the goods another person may produce. However when goods are exchanged for a commonly acceptable medium, each person can freely spend it purchasing goods that they require. The value of a paper money depends on its countries real wealth. So face value of the money is really nothing, its real measure is its purchase power relative to other currencies. Having a universal currency would alleviate a lot of issues with paper money but then there should be no trade borders either.
Agreed. Currency is traded as a commodity and hence exchanging currencies is not always usurious. What makes it usurious is when two currencies of the same purchase power are traded for unequal quantities.
1 - Interest is not added on to the commodity itself but rather on the sale contract against payment in time. This is actually not interest if a commodity is involved. It is the deferred sale price of the commodity. What is important is that the price of the commodity should be known on the spot and the buyer should know exactly how much he will pay for not paying the whole amount on the spot. This is allowed in Islam. What would make this transaction usurious would be when the buyer fails to complete payments on the required deadline then the seller adds on more payments to the agreed sale price. It is not allowed in Islam to change the sale price once it is agreed upon. The seller could still demand a penalty if it is determined the buyer defaulted without any genuine reason, and this penalty can go to charity but NOT to the seller. The seller is only entitled to the debt (sale price) owed by the buyer. Or the seller could simply extend the deadline.
2 - Agreed. I have made this same point more clear in my point 1 reply.
Yes agreed.
Which is why I said I could not reconcile b/w the theory and practice of Islamic banks.
This is where I disagree. When money is lent, its not the face value of money that should be considered but its purchase power. After all the money was lent to purchase not to horde. The face value of paper money means nothing, its the purchase power which it represents.
Re: Question regarding Mortgage???????
and if that $1000 were spent on a business, should I get a share in the profit? Is Loaning = investing?
It depends on the contract. The contract must clearly define what percentage of profit you will share based on your initial investment and whether you will be actively involved in managing the business as well or whether you choose to the a passive investor in which the broker or manager or whatever manages your business must have his terms clearly defined. Whether he gets a certain percentage amount for his service contribution or a fixed salaried amount. This is similar to buying shares of a company in which you are just a passive investor who shares the profit or less of the company. I also agree with what Br. Psyah replied to you on this post as well.
Re: Question regarding Mortgage???
Wa’alaikumSalam bro.
I see what you mean about the purchase power of paper money. And I agree in principle about the rectification using inflation. But you see it is this that disturbs me. In the past money real money was a standard for value. If today this standard i.e. paper money is itself a moving target then the monetary value itself binds doubt into the contract.
Re: Question regarding Mortgage???????
Wa'alaikumSalam bro.
I see what you mean about the purchase power of paper money. And I agree in principle about the rectification using inflation. But you see it is this that disturbs me. In the past money real money was a standard for value. If today this standard i.e. paper money is itself a moving target then the monetary value itself binds doubt into the contract.
Thats is partly because of economy seen as a global entity now. Currency inflates in comparison with other currencies, leaving no standards or abolsute frame of reference. In some places, official currency is backed up by the gold reserves, unlike in the US. I think we will head to a global point system, getting rid of currency concept all together (in 25-20 years). Debates, however, will go on.
Re: Question regarding Mortgage???????
Wa'alaikumSalam bro.
I see what you mean about the purchase power of paper money. And I agree in principle about the rectification using inflation. But you see it is this that disturbs me. In the past money real money was a standard for value. If today this standard i.e. paper money is itself a moving target then the monetary value itself binds doubt into the contract.
I agree that it is a moving target and the goal of Islamic financial services should be to eliminate as much uncertainty as possible. There could be numerous ways to accomplish this but first the Islamic financial system needs some footing and support from governments and major players in the world economics.
I think paper currency was inevitable given the population and economic growth the world has seen especially in the 20th century. Its also not possible to back currency by Gold standard anymore since Gold is not the only measure of a countries wealth. It is but a fraction now. GDP takes into account many many factors regarding the goods and services a country can provide and given the magnitude of the task it still misses out much. However paper money finds its use because people need a intermediate medium which can be used to exchange their goods and buy what they need. The economy is no longer concentrated in just trading certain food items, spices, armor and clothing. I think if we had a universal currency which every country uses, then things would get much better in terms of inequalities which can be perpetrated through interest. Honestly, if I had an Islamic bank which could keep my deposits and give me my fair share of profit and loss, I would be doing that but sigh no such option in sight.
Re: Question regarding Mortgage???????
Honestly, if I had an Islamic bank which could keep my deposits and give me my fair share of profit and loss, I would be doing that but sigh no such option in sight.
If such thing exist, and you end up losing your money, would you curse your bank for bad investment?
Why need a bank, when you can invest by yourself in stocks etc.
Re: Question regarding Mortgage???????
If such thing exist, and you end up losing your money, would you curse your bank for bad investment? Why need a bank, when you can invest by yourself in stocks etc.
Yes, but the probability of me loosing in stocks is by far more than the bank making investments and again, the job of the Islamic bank would be to make investments in halal or permissible businesses, which are few to none today based on some argument or whatsoever. I'm sure you would like to see the profit sharing on your regular deposits. Perhaps those who do not, could opt for accounts which do not have this option, if Islamic banks offer it. However on a very broad and wide scale of investment it should differ less with stocks. So far in the US I do not know any Islamic fund which has been doing good.
Re: Question regarding Mortgage???????
Peace again ... just another question and some thoughts ...
Firstly, if free market economy is so desirable then the World Bank should allow rival banking systems to exist. Countries can then choose which organisation to get loans from ...
Secondly, when paying back a loan on a moving target what do we pay back every month? Do we average the rate of inflation over the whole pay back period? Or over each year? Or over every month? And inevitably we will always be playing catch up to a moving target. It's not ideal is it?
Re: Question regarding Mortgage???????
Peace again ... just another question and some thoughts ...
Firstly, if free market economy is so desirable then the World Bank should allow rival banking systems to exist. Countries can then choose which organisation to get loans from ...
Secondly, when paying back a loan on a moving target what do we pay back every month? Do we average the rate of inflation over the whole pay back period? Or over each year? Or over every month? And inevitably we will always be playing catch up to a moving target. It's not ideal is it?
I agree, free market means there should be competitors. It would be nice if the gulf and oil rich Arab countries could come up with an arrangement of this sort. This would be a big help to introduce Islamic finance into the global scheme of things.
I agree, but this too depends on the stability of currency. There will always be some variance whenever time is involved in a transaction. An interval of time should be chosen in which we can have relative stability of the currency and then renewed each interval on the remaining balance. This is just a thought not something concrete. It has its problems but what other alternatives do we practically have. Gold cannot be a currency or its standard now.
Re: Question regarding Mortgage???
what a wasted discussion again.
Interest is here to stay. Everybody including almost all muslims take loans and make loans with interest.
all talk of whether islam allows it, is 5/5% riba, can we somehow call it something else etc is just rhetorical.
I got the money and if you want it you pay my terms.
end of story
Re: Question regarding Mortgage???????
Modern day banking and interest are by no means the same as the ribba charged during primitive times. There was an element of coercion in the ribba.
Re: Question regarding Mortgage???
Yes indeed. Good post.
Re: Question regarding Mortgage???????
People are terming modern day inventions and innovations as haram which caused the rapid development of the world and an accelerated rate of world's population over the last two hundred years.
Re: Question regarding Mortgage???
I would disagree here. Every modern day banking scheme will try its best to seize your assets if you default. In other words the coercion has been legalized. The same would be true even if you defaulted with Islamic banks but theoretically the penalties should not add to their income or sale value but be donated to charitable cause.
Re: Question regarding Mortgage???????
To go on a tangent, I believe it is entirely possible to buy a house on full cash. I said believe because it is theoretically possible, but I didn't do it. Maybe not in LA or SF, but for sure in the South. Not many people want to try it though.
But I didn't try either so :D
Re: Question regarding Mortgage???????
To go on a tangent, I believe it is entirely possible to buy a house on full cash. I said believe because it is theoretically possible, but I didn't do it. Maybe not in LA or SF, but for sure in the South. Not many people want to try it though.
But I didn't try either so :D
Honestly I think it is possible if decide to stay single for 5-6 years while having a good professional job. I got married when I had my first job so I haven't been able to do it.
If you are a doctor, then really don't worry. It will not take you more than 2-3 years to pay it off.
Re: Question regarding Mortgage???????
Someone would have to finish school, pay off his loans and save enough money to purchase. That puts a man at about 30 years old. Doesn't Islam encourage marriage at an early age?
Re: Question regarding Mortgage???????
Honestly I think it is possible if decide to stay single for 5-6 years while having a good professional job. I got married when I had my first job so I haven't been able to do it.
If you are a doctor, then really don't worry. It will not take you more than 2-3 years to pay it off.
But, when you are a doctor, you are not looking at the budget housing that will be paid off in 2-3 years. Rather, you are looking at million dollar downtown condos, luxury designer houses, or that lake house in that exclusive golf community. Everyone does the same thing, at their own income level.