It is not permissible to take out riba-based loans from the bank or elsewhere, even if that is to buy a house to live in, because of the texts which state that riba is emphatically forbidden, and the stern warning that is issued against it. Allaah says (interpretation of the meaning):
“O you who believe! Fear Allaah and give up what remains (due to you) from Ribaa (from now onward) if you are (really) believers.
279. And if you do not do it, then take a notice of war from Allaah and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums)”
Muslim (1598) narrated that Haabir ibn ‘Abd-Allaah said: The Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba and the one who pays it, the one who writes it down and the two who witness it, and he said: they are all the same.
Ibn Qudaamah (may Allaah have mercy on him) said: Every loan in which it is stipulated that more be paid back is haraam, with no difference of scholarly opinion. Ibn al-Mundhir said: They were unanimously agreed that if the lender stipulates that the borrower must pay back an extra amount or give a gift, and he gives the loan on that basis, this is riba. End quote from al-Mughni (6/436).
Buying a house is not an excuse for committing this grave major sin. You could be content with renting a house, as you said.
You made a mistake by entering into this transaction, and you should have stuck to your guns even if that led to your parents or your family getting angry, because there is no obedience to any created being if it involves disobedience towards the Creator, and your objection was not enough when you went along with signing for the loan or part of it being in your name.
What you have to do now – and what everyone who has taken a riba-based loan must do – is repent to Allaah and regret what has happened, and resolve firmly never to go to this major sin again, concerning which such a stern warning has been issued that is not mentioned with regard to any other sin. We ask Allaah to keep us safe and sound.
But there is no sin on you if you live in this house. The Standing Committee was asked about a man who took a riba-based loan and built a house. Should he knock down the house or what?
If the situation is as described, what you have done by taking out this loan is haraam because it is riba, and you have to repent and ask forgiveness for that, regret what you have done and resolve not to do it again. As for the house that you built, do not knock it down, rather make use of it by living in it etc, and we hope that Allaah will forgive you for what you have done. End quote from Fataawa al-Lajnah al-Daa’imah (13/411).
We ask Allaah to pardon us and you, and to forgive us and you.
And Allaah knows best.