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Fatwa CenterA Muraabahah installment sale with late fee charge
Question
Purchasing a house in USA through Murabaha contract:
Assalamu Alaikum,
I need to purchase a house in USA according to Shari'a. There's an Islamic financial institution provides 'Murabaha' as follow:
I find a house, say for $100,000 then the IFI will buy it for me, pay its full price upfront to the seller, and trun around any sells it for me, say for $150,000 (I put $20,000 down) So I owe $130,000 which I have to pay on equal monthly payments for 15 years that do not change. The institution base their profit on the current market interest rates (which used by banks deal in riba). They also charge a fixed $50 late fee which goes to a different company for adminstration and follow up fees and doesn't go to the institution. They don't register the house under their name, rather it gets transferred directly from the original seller to my name so they can avoid extra registration fees. Lastly, I think they use the fund from the investment accounts to finance the house, and they might use other sources (not sure but might be from other institutions who deal in riba)
Is this method of Murabaha permissible? Mainly their sorce of financing, late fee charge, profit calculation, and not registering the house under their name?
Here's their site for more info:
http://www.universityislamicfinancial.com/IBDMain.html
Wa jazakum Allahu Khaira,
Wassalam,
Osman
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His slave and Messenger.
If this institution does not really own the house by contract and the house does not enter into its ownership and guarantee before it sells it, then this contract is forbidden.
Similarly, if they impose a fine in case of delay in paying the installments - even if this fine goes to another party - then the contract is forbidden because this condition is among the Riba (interest and/or usury) conditions.
However, if the house really moves to the ownership of the institution, before selling it to you, and it becomes its liability, then the contract is correct if it is free from the condition of paying a fee in case of delay of payment.
Finally, in transferring the ownership, it is not an obligation to register the house in the name of the institution because this is a mere legal measure and authentication and it is not a condition or a pillar in the sale.
For more benefit on the permissibility of selling on installments, please refer to Fataawa 86960 and 81662.
Allaah Knows best.
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