A Brief of Islamic Law

Rules Regarding Mortgage (rahn)

  1. Mortgage means that a person effects a conveyance of property to another person as security for money debt, or property held under responsibility, with a provise that if that debt is not paid, the creditor may pay himself out of the proceeds of that property.

(1). What is nowadays aommonly called ~Rahn~ in Iran, is not realy Rahn. It is customary to give some money as lean to the owner of the house in order to live in his house. But if this act is without any rent, it will be usury and Halal (allowed), and the person cannot live in it, and if it is with rent and leasing the house is a condition for giving the loan, then it will be Halal (allowed), and if giving the loan is a condition for leasing the house, as an obligatory precaution, it is not permissible.

  1. A person can mortgage that property over which he has a right of disposal or discretion, and it is also in order if he mortgages the property of another person with his permission.

  2. The benefit which accrues from the mortgaged property, belongs to the owner, whether the mortgagor or any other person.

  3. The mortgagee cannot present or sell the mortgaged property to another person without the permission of the owner, whether he is the mortgagor or any other person. However, if he presents or sells it to another person, and the owner consents to it later, there is no harm in it.

  4. If the creditor demands the repayment of debt when it is due, and the debtor does not repay it, the creditor can sell the mortgaged property and collect his dues, provided that he had been authorised to do so. And if he was not authorised to do so, it will be necessary to obtain permission from its owner. And if the owner is not available, he should, as an obligatory precaution obtain permission for the sale of the property from the Mujtahid. In either case, if the sale proceeds exceed the amount due to him, he should give the amount in excess of his debt to its owner.

  5. If the debtor does not possess anything other than his house he occupies, and the essential household effects, the creditor cannot demand the repayment of debt from him. But, if the thing mortgaged by him is his house or its household effects, the creditor can sell them and realise his dues.