Posted by: islamicfinancingnews | September 1, 2012

Islamic finance has a commercial application

When you are considering applying for Islamic finance for commercial properties, it’s helpful to be aware the basic qualifications are similar to those required for residential properties. The main difference is that personal income is the main factor that qualifies a borrower for a residential loan, whereas the amount of income the property produces is the main qualifying factor a lender takes into account to determine the amount of a commercial type loan.

A lender looking at Islamic loans will assess the risk rating for these expensive commercial loans by reviewing a borrower’s credit score, income and asset information, a sizeable down payment amount and a sufficient amount of reserve funds in place to help determine the risk of default on the loan.

The attractiveness of the commercial property will also be taken into consideration, with office and retail type buildings ranking higher than other properties. Examples of less desirable properties that elevate the risk for the lender could include a funeral home which requires a special use permit to operate since it doesn’t fit into the more common residential or commercial zoning categories; while the operation of a gas station or auto repair shop could leak contaminants to the ground below creating environmental concerns.

Talk to your Islamic finance lender about the specific loan approval requirements necessary to obtain commercial real estate financing that can include Islamic mortgages.

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