Zakat on Mortgages and Property

In short: your own home, which you live in, is not counted. You cannot deduct your whole mortgage. You may be able to deduct up to 12 months of capital repayments, but never interest.

Debts and Zakat

Debts that are due now, such as bills, rent and payments already owed, can be taken off your Zakatable wealth. If what you owe now is more than what you own, no Zakat is due. If what is left is above the nisab, you pay 2.5% of it.

Long-term debts are different. A 25-year mortgage is not taken off in full, because that would wipe out Zakat for almost every homeowner. Contemporary Hanafi scholars, such as Mufti Taqi Usmani, and most UK scholars today hold that only the part of a long-term debt that is due in the coming year reduces your Zakat. (Classical Hanafi texts deducted debts in full, but that was before long-term loans like mortgages.)

Conventional mortgages

Interest (riba) is forbidden, and scholars encourage leaving an interest-based mortgage as soon as you can. For Zakat, the outstanding balance is not deducted. The National Zakat Foundation, approved by its scholar Mufti Amjad, allows you to deduct up to 12 months of upcoming capital repayments, and only if paying Zakat would make it hard to keep up your payments. Interest is never deducted, so an interest-only mortgage gives no deduction. Some scholars take a stricter view and allow only the payment due this month.

Islamic home finance

Home purchase plans such as Ijara, Murabaha and Diminishing Musharakah are treated in the same way: deduct no more than the next 12 months of capital or acquisition payments, not the whole balance of the plan.

Offset and flexible mortgages

Money in an offset savings account is still your money. It is counted in full for Zakat, even though the bank uses it to reduce the interest you pay.

Second homes and buy-to-let

  • A property kept as a long-term investment, with no firm plan to sell, is not counted.
  • Rent you still hold on your Zakat date is counted, like any other cash.
  • Property bought to sell on (flipping) is trading stock. Its market value is counted every year.
  • When you sell a property, the money you still hold on your Zakat date is counted.

Use our Zakat calculatorPay your Zakat

Sources: National Zakat Foundation – deducting mortgage payments; HNCO – Zakat and mortgages. This guide is general information. Please ask a scholar about your own circumstances.