Q: The submitter says he has recently converted to Islam. He had bought a house before he converted to Islam through a transaction widely prevailing in the West. To clarify, he paid a certain amount of the price in advance and borrowed the remainder on credit. Knowing that a Muslim may not pay or receive interest, he inquires about the ruling on interest that he has to pay for that loan.
A: If the reality is as you have mentioned, the person in question should submit his new status to the authority from which he took the loan asking it to take back only the capital, i.e. without interest, as interest is prohibited according to Islam. Doing so is more precautionary and frees him from accountability for paying the usurious interest. If the borrowing authority approves of it, it will be alright, praise be to Allah. Otherwise, he will have to pay the interest stipulated in the contract he had signed before converting to Islam.
May Allah grant us success! May peace and blessings be upon our Prophet Muhammad, his family, and Companions!
Permanent Committee for Scholarly Research and Ifta’
Member Member Deputy Chairman Chairman
`Abdullah ibn Qa`ud `Abdullah ibn Ghudayyan `Abdul-Razzaq `Afify `Abdul-`Aziz ibn `Abdullah ibn Baz
Source : alifta.com