Mortgage and Zakat.
Answered by Ustadh Tabraze Azam
Question: Assalam alaykum
I purchased a house with an Islamic mortgage. It was for 31 years. It was a fixed rate for 2 years after which I can pay off a larger amount. The 2 years end this summer (July/August) Inshallah.
I also have an additional apartment (which I currently rent). I was thinking to sell it and pay off some of the Islamic mortgage.
Once I sell the apartment and have the money in my account, do I have to pay zakat on the money where the intention is to pay off the mortgage?
Answer: Wa alaikum assalam wa rahmatullah,
Yes, you would need to pay zakat on the income received from the sale of your second home. This is on condition that your zakat due date occurs before you are able to direct these funds as a lump sum towards your mortgage payment.
Normally, debts are deducted for the purposes of one’ zakat calculations. But there is some nuance between a debt which is owed to people and that which is owed to an institutionalised, financing body, and also between short and long term debts.
In our times, mortgages are conventionally long term debts taken from a bank or the like, and accordingly, you may only deduct one lunar years’s worth of upcoming payments as a liability in your zakat calculations.
However, the details stated above also depend on the specific nature of the home purchase plan in question. For example, diminishing musharakah and murabaha contracts would have differing rulings.
(Mawsili, al-Ikhtiyar li Ta‘lil al-Mukhtar (1.150); Razi, Tuhfat al-Muluk (132))
Please also see this answer.
And Allah Most High knows best.
[Ustadh] Tabraze Azam
Checked and Approved by Shaykh Faraz Rabbani
Ustadh Tabraze Azam holds a BSc in Computer Science from the University of Leicester, where he also served as the President of the Islamic Society. He memorised the entire Qur’an in his hometown of Ipswich at the tender age of sixteen, and has since studied the Islamic Sciences in traditional settings in the UK, Jordan and Turkey. He is currently pursuing advanced studies in Jordan, where he is presently based with his family.