Home mortgage in western countries : commercial real estate loans

Fatawa Question

Assalamulikom Sheikh Mozer, My wife and I purchased our first home using cash. We took out an equity line of credit on this home, with which we used for home improvements and to invest in a rental property. We then took out another equity line of credit on this rental property, which is not being used. Our plans are as follows : to purchase a mobile home park using a commercial loan, which requires a down payment. We planned on using the unused equity line of credit to cover this down payment. In order to be approved for this commercial loan, one must have good credit, a down payment of 20 %, and the business that we plan to purchase must meet a specific requirement of appraisal/net profit. The bank also must approve the business plans in order to assure that the business has little chance of failure, this way providing security for both the business owner and the bank, because if the business fails, the bank will be forced to liquidate the business and will also have to take a loss. Once approved, the owner assumes complete responsibility of the business and is expected to compensate the bank by paying interest on the loaned amount. We feel as though the economy in which we live in today makes it nearly impossible to invest in one's future without using a loan to start up. In my specific situation : 1. I must work for someone for several years while trying to save up enough money to branch out on my own. Or, 2. Since I do not have a high educational degree, I would be stuck working minimum wage jobs, which would put hardship on my wife and kid. Or, 3. I may choose to invest in my future by furthering my education, which I would be forced to pay for with a loan. Even upon graduation, one cannot begin a business in his field of specialty without starting it up with a loan. After considering the struggles one would encounter if prevented from using a loan to invest in one's future, we hope to receive a fair answer on whether the equity line of credit and / or the commercial loan is permissible in Islam. Jazakum Allahu Khairan

Fatwa

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Publication Date

2007-11-22

Main Subjects

Economics & Business Administration
Islamic Studies

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-785684

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