Salaam and Ramadan Kareem,
Having watched Mufti’s video re mortgages and long term loans https://youtu.be/ZbMkUhyt4ag I had a query.
I have an offset mortgage account and have some funds in their which I intended to utilise to pay off some of my mortgage. Right now it’s sitting there and reducing the overall interest payable at it’s an offset account.
However if I choose to do this before January 2022, I will have to pay a 2.5% fee for early repayment charges. Having watched the video from mufti Sahab which says that one can deduct any amount that they intend to utilise in the immediate or near future to pay off a debt in full/substantially, I wondered if if I could deduct the amount that I intended to pay down right now (but for the early repayment charges) from my zakat calculation (as a liability), but pay that money following January 20-22 when I would not be liable to pay the early repayment charge.
Also, in the past I had only been deducting 1 months mortgage liability for assessing net worth for zakat purposes. In Mufti’s video he says you can deduct upto 12months. Can I change to this method now?
The default ruling in relation to debts is that one may deduct the amount of debt from the value of their zakatable assets. For example, if a person has £1000 worth of debts and their zakatable assets are valued at £3000, then they will pay zakat on £2000.
Long term debts, however, are treated slightly differently. With long term debts one may only deduct those payments which will be made in the coming year. They cannot deduct the full amount as the future payments are not being demanded for at this stage and a debt is that which is being demanded for or can be demanded for at any time.
If, however, a person intends to make the payments as quickly as possible, despite having the discretion to delay payments, then the ruling can revert back to the original rule of the entire debt being a deductible. Hence, any payments set aside to pay off the existing debt can be deducted provided there is a firm resolution to use that money for the debts only. If you are delaying payment due to early repayment charge that will not change the ruling as the money has been designated to pay off the debt.
Going forward you may deduct one years payments when calculating your zakat.
Ifta Research Fellow
Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel