Rules regarding Mortgage (Rahn)
2309. Mortgage means that a person effects a conveyance of property to another person as security for money indebted, with a proviso that if that debt is not paid, the creditor may pay himself out of the proceeds of that property.
2310. 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.
2311. 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, that is, those who squander their wealth and also he has not been prohibited by the Mujtahid to use it.
2312. A person can mortgage that property over which he has a right of disposal or discretion, and it is also in order if he mortgages the property of another person with his permission.
2313. The property mortgaged must be such in which trading is permissible by Shari’ah. Hence, if alcoholic liquor or something like it is mortgaged, the transaction will not be in order.
2314. The benefit which accrues from the mortgaged property, belongs to the owner.
2315. The mortgagee and mortgagor cannot present or sell the mortgaged property to another person without the permission of each other. However, if the owner presents or sells it to another person, and the mortgagee consents to it later, there is no harm in it.
2316. If a mortgagee sells the mortgaged property with the permission of the owner, the money obtained from the sale will be considered as mortgage, like the property itself.
2317. 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, and return the rest. However, if he has access to a Mujtahid, then as per obligatory precaution, he should obtain permission for the sale of the property from the Mujtahid.
2318. 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 settle his dues.