Rulesof Mortgage (Rahn)
2401. Mortgage means that a person effects a conveyance of property to another person as security for money debt, with a proviso that if that debt is not paid, the creditor may pay himself out of that property.
2402. It is not necessary to pronounce a prescribed formula for effecting the mortgage. If the debtor conveyances his property to the creditor with the intention of providing security for the debt, and the creditor accepts it with the same intention, the mortgage is in order.
2403. The mortgagor and the mortgagee should be adult and sane, and
should not have been coerced by anyone. Moreover, the mortgagor should not
be feeble-minded. Also, a bankrupt, who has been barred from right of
discretion over his property by a fully competent Mujtahid, cannot enter
into mortgage arrangement.
2404. A person can mortgage that property over which he has in Shariah a right of disposal or discretion, and it is also in order if he mortgages the property of another person with his permission, like documents used now for security.
2405. The property mortgaged must be such in which trading is permissible by Shariah. Hence, if alcoholic liquor and gambling things, which cannot be owned in Shariah and things, which cannot be owned in custom, are mortgaged, the transaction is void.
2406. The benefit, which accrues from the mortgaged property, belongs to the owner.
2407. The mortgagee and mortgagor cannot present or sell the mortgaged property to another person without the permission of the other. However, if he presents or sells it to another person, and the other consents to it later, there is no harm in it.
2408. If a mortgagee sells the mortgaged property with the permission of the owner, the mortgage is over. But if the mortgagor sells it with the permission of the mortgagee, with an understanding that its proceeds will be mortgaged, that is, the sale proceeds of that property will get mortgaged like the property itself, then he must follow the understanding.
2409. If the creditor demands the repayment of debt when it is due, and the debtor does not repay it, the creditor can sell the mortgaged property and collect his dues; but if it is possible, he should obtain permission for the sale of the property form a fully competent Mujtahid.
2410. If the debtor does not possess anything other than his house he occupies, and the essential household effects, the creditor cannot demand the repayment of debt from him. But, if the thing mortgaged by him is his house and its household effects, the creditor can sell them, and realize his dues. As an obligatory precaution, entering into mortgage is not realized before delivery of its subject to creditor.
2411. As an obligatory precaution, enterring into martgage is not realized before delivery of its subject to creditor.
2412. It is customary among people that they give a loan to landlord and take his house as mortgage and make it a condition to pay less rent or they do not pay any rent and this kind of residence is called mortgaged house (Rahni). But this is Reba and Haraam. The correct way is to rent the house to tenant for a rent, even if it is less than usual and then make a condition of it that tenant should give an amount of money as loan to landlord. This is not Reba and it is Halal and there is no Rahn.