Rent payments with redemption

Question

Assalamu aleikum. I have a question regarding mortgage. One of our state banks provide a program for young families. You have to open a deposit account and make certain deposit payment every month which are considered rent payments at the same time. For your deposit you have also certain interest from the government and the bank. When your deposits get a 50% of accommodation price you can get a loan from the same bank with 4% interest in order to make a redemption of the accommodation. The accommodation itself becomes a collateral. What we want to do is to make two-times more deposit payments in order to make redemption without getting a loan. Is it allowed if we do that and get rid of interest from bank and government as a sadaqa (charity)?Some financier in our country who is also considered to be a Muslim says that interest from bank and government is in fact a government help for young families. It should be considered as a help, not interest. But I need to know the ruling on this from sharia point.

Many thanks

Answer 1

If the government is calling it "interest" then that's exactly what it is. The government is not shy about saying it's giving help.

However, in the absence of other reasonable financing options (and I don't think they exist, most of the so called "islamic" financing schemes out there are not actually islamic) it's ok to do what you have done just give the excess on your principal (the riba) to charity as you proposed.