Q: My local council offers this scheme, called Newham NewShare . From the website it states:
“An equity loan from us will make up the difference. The type of property you want to buy will decide what percentage of the cost you will have to fund from a mortgage and deposit. Equity loan fee When you buy your home, you will pay a yearly fee of 1.75 per cent on our equity loan. This increases annually in line with the Retail Price Index plus one percentage point. Your fee will reduce as you pay off the loan.”.
Would the Equity Loan fee be considered interest?
الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب
h The NewHam NewShare scheme is a clear case of a riba-based loan and is not permissible for Muslims. The borrower has 100% ownership of the property whilst paying riba in two ways. The first, is by way of what is described as a “yearly fee of 1.75 per cent on our equity loan”, and the second when the borrower buys out the equity loan at the current pro rata market value of the property [if it has increased in value as will undoubtedly be the case].