Mu' meneen Brothers and Sisters,

As Salaam Aleikum wa Rahmatullahi wa Barakatuh.  (May Allah's Peace, Mercy and Blessings be upon all of you)

One of our brothers/sisters has asked this question:

Assalaam Alaikum,

I live in one house and rent the other. Unfortunately both have a mortgage loan. Inshallah trying to pay them off. The house that I rent, I had put down 20,000 dollars, now the property value had went up, so my equity in the house is probably 40,000 now. Am I reliable to pay any

Zakat on this house, if yes should I pay zakat on 20,000 or 40,000? or should I pay zakat on the profit from the rent I get? Jazakallah Khair

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Answer:

Zakah on house

In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is no one (no idol, no person, no grave, no prophet, no imam, no dai, nobody!) worthy of worship but Allah Alone, and we bear witness that Muhammad(saws) is His slave-servant and the seal of His Messengers.

There is no zakaah liable on the house one stays in, regardless of how big it is and how much it is worth.

The second house, whether rented or not, will be liable for zakah on the market value of the house less the outstanding loan amount. Thus for example if the house was bought at a value of $200,000.00 at the time of purchase with a down payment of $20,000.00 and a loan of $180,000.00, and now the house is worth $400,000.00; then the zakah would be calculated at a rate of 2.5% of $400,000.00 (market value) less $180,000.00 (the outstanding loan amount) which is $220,000.00.

Beloved and dear Brother in Islam, although you have not specifically asked us regarding the mortgage, it is our duty as your brothers and well-wishers in Islam to remind you as we remind ourselves, that taking an interest-based loan on a mortgage is a manifestation of ‘riba’ which has been specifically declared haraam by Allah and His Messenger (saws).

Allah says in the Holy Quran Chapter 2 Surah Baqarah verse 274-276: But those who devour ‘riba’ become like the one whom Shaitaan has bewitched and maddened by his touch. They have been condemned to this condition because they say, “Trade is just like ‘riba”, whereas Allah has made trade halaal and ‘riba’ haraam. Henceforth, if one abstains from taking ‘riba’ after receiving this admonition from his Lord, no legal action shall be taken against him regarding the ‘riba’ he had devoured before: his case shall ultimately go to Allah. But if one repeats the same crime even after this, he shall go to Hell, where he shall abide for ever! Allah deprives ‘riba’ of all growth but will give increase for deeds of charity, and Allah does not like an ungrateful, sinful person.

Allah says further in the Holy Quran Chapter 2 Surah Baqarah verse 278: O Believers!, fear Allah and give up that ‘riba’ which is still due to you, if you are true believers. But if you do not do so, then you are warned of the declaration of war against you by Allah and His Messenger!

Al-Tirmidhi Hadith 2829 Narrated by Ali ibn AbuTalib

Ali heard Allah's Messenger (saws) invoke the curse of Allah on those who took usury, those who paid it, those who recorded it, and those who refused to give sadaqah.

Whatever written of Truth and benefit is only due to Allah’s Assistance and Guidance, and whatever of error is of me. Allah Alone Knows Best and He is the Only Source of Strength.

Your Brother in Islam,

Burhan