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Question:

Are Deposits Held in an Offset Mortgage Account subject to Zakat?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

The Answer:

Mortgages are interest based lending transactions.  Interest based transactions have been categorically forbidden.  To engage in such transactions without necessity and exemptive circumstances is not permissible. One who has engaged in such transactions should endeavour to switch to an Islamic home purchase plan if available as soon as possible. Meanwhile, one must repent for engaging in such a contract.

As opposed to a repayment mortgage, an offset mortgage is linked to one – or sometimes multiple – bank accounts.  The amount of interest owed is reduced by the amount held in the linked accounts.  In the interim, a person has access to this account and can withdraw deposits as required[1].

Monies held in an offset mortgage account are subject to Zakat. Nevertheless, whilst Zakat purifies your wealth, interest based transactions and funds continuously contaminate funds. Thus, one should endeavour to set himself/herself free interest bearing transactions as soon as possible. 

And Allah Ta’ālā Alone Knows Best
Mufti Faraz Adam,
www.darulfiqh.com

DISCLAIMER:
The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any institutions to which he may be affiliated.
Arguments and ideas propounded in this answer are based on the juristic interpretations and reasoning of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another Mufti may reach different conclusions to the one expressed by the author. Whilst every effort has been taken to ensure total accuracy and soundness from a Shari’ah perspective, the author is open to any correction or juristic guidance. On the event of any juristic shortcomings, the author will retract any or all of the conclusions expressed within this answer.
The Shari’ah ruling given herein is based specifically on the scenario in question.  The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage.  This answer may not be used as evidence in any court of law without prior written consent from the author.  Consideration is only given and is restricted to the specific links provided, the author does not endorse nor approve of any other content the website may contain.


[1] https://www.moneysupermarket.com/mortgages/what-is-an-offset-mortgage/

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