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I understand that the husband must give Mehr before/on marriage.

But is it something that needs to be mutually agreed upon as part of marriage contract as it is done these days or the original intent was that husband should give a gift to his wife that he can afford to give without needing to ask her (or her father/relatives)?

I'm asking this since these days the Mehr is usually demanded by bride's family (eg. 10 tola gold, 1 million cash, etc) and it is quite a lot such that it is getting harder for Muslims to get married.

What is the Islamic ruling in this regard?

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Marriage is between two consenting adults. Having said that, at the time of marriage of Hazrat Ali RA and Hazrat Fatima RA, Hazrat Ali was a man of very limited means.

He had some armour, sword and a camel for travelling according to this reference. The Prophet PBUH said that sword and camel were indispensable, and asked Hazrat Ali to sell his armour and buy the necessary stuff required to make the arrangements.

Additionally, the same reference also states that Abdul Rahman ibn Awf offered 10k Dirhams in gold as dowry (a huge sum), but his proposal was scoffed at due to materialism.

Our beloved Prophet PBUH, set an example for us. He placed character before wealth.

The point to take away is that, marriage is not meant to place hardships on one. It should be affordable. He asked Hazrat Ali, what he had, not how much he could borrow.

If you have to take a loan to satisfy her parents', perhaps it is best if you say no now, as it might be the start of "demands" that you will feel hard pressed to fulfil.

Additionally, based on fiqh, Ulema have a minimum Mehr. Anything above that is optional. The details vary based on which school of thought you follow. You can ask an imam, he should guide you better than I can.

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