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I'm aware there are 3 types:

  1. I'll buy and then rent it to you and you pay it off slowly
  2. I'll buy it and sell it to you for higher price
  3. I'll buy and sell it loss/profit will be shared

3 and 1 are completely ok. But the most popular option that is 2 is sold as halal, But I'll argue it's anything but that.

The bank buys the house AND then you are required to buy the home at higher price.

The transaction up until the bank buys the house is not controversial. Whether bank or another seller owns it, it doesn't matter.

The problem is that bank REQUIRES you to buy the house before their purchase of it.

So instead of saying

  • I'll give you $100
  • you will give me back $150

BANK > $ > YOU > $$ > BANK

It basically adds an extra step

  • I'll buy this box for you for $100
  • But then you will have to buy it from me at $150

BANK > $ > HOUSE > YOU > $$ > BANK > HOUSE

Interest is paying more than what you owe. Which can be phrased, requiring you to pay more than what you got. Similarly, you got a house that is $100, and you will be required to pay $150.

Muhammad Umer
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  • First of all riba is interest on a credit or debt this doesn't seem to me mentioned anywhere in your post. You basically repeat the claim of the disbelievers as mentioned in the Quran saying selling is similar to riba انما البيع مثل الربا, but it isn't (see verse 2:275). – Medi1Saif Jan 14 '23 at 18:30
  • you didn't answer the question, useless comment – Muhammad Umer Jan 14 '23 at 19:28
  • contract is interest based debt if it says buy me X for Y and then I'll pay you Y+1 – Muhammad Umer Jan 14 '23 at 19:30
  • "The bank buys the house AND then you are required to buy the home at higher price.", As long as interest is not involved, then it should be halal. The bank will have to sell it at a higher price to make profit. The difference between the bank and the original seller is that the seller isn't going to wait 30 years to get his/her money. So the bank will give the original seller the money then you'll pay the bank back at the higher price over a 10, 15, or 30 year period. Interest is essentially making money over money, which is what this situation isn't doing. It's making money over property. – YoMango Jan 16 '23 at 07:23
  • "As long as interest is not involved" -- question wasn't if interest is halal?? that was weird... question is that transaction is equivalent of interest, if not how so? You said "making money over money" so if I say i'll lend you 3 apples and you have to give me 6 apples, that's not interest to you? pretty convenient? – Muhammad Umer Jan 26 '23 at 05:10

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