Can we take a loan & later re-finance with a Shariah-Compliant Company?

We are in the market to purchase a home and have applied for a loan through a Muslim, shari`ah-compliant finance company. There is also a new development subsidized by the city for first-time home owners, but you have to purchase the home through their mortgage company. Could we apply for the loan, purchase the home, and then re-finance with the Muslim company, given that there would be a few months where our loan would be with interest?

Wa alaikum salaam wa rahmatullah,

Yes, you must stay away from applying for the loan and incurring the interest, even with the intention of switching to the lawful finance within a few months. The prohibition related to this is of the highest type, similar to that of eating pork or drinking wine. As such, there is no dispensation except in extreme situations of life and death.

And Allah alone gives success.

Yusuf Mullan