Your Easy Guide to Church Building Loans

Introduction

Did you know that you could potentially get a church building loan, even if you don’t have a substantial credit history?

Or that with a prefab church, you might not need to hire professional builders to put up your new establishment?

In this guide, you’ll find out what you need to know about church building loans, including what they are and where you can find them.

Let’s get going!

What’s in this guide?

What is a church building loan?

When it comes to your church, it can be challenging to try and make sure that there’s enough room for your congregation, especially when things start getting crowded.

You can either move, expand, or start a whole new construction for the central part of your church, which can have a drastically different pricing range.

For instance, buying a church could cost you upwards of $3 million depending on the situation, or as little as $100,000, but there are a few main problems with purchasing an existing building.

Firstly, you could inherit the problems of the existing church, such as needing to take charge of renovations and repairs.

The second problem is that you still might not have the layout that you genuinely want, and you might be stuck regarding the space you can realistically use.

This is where building your church can be the best solution, and where loans come in.

Loans can help you to finance the building or expanding your existing church, using modular steel structures that can be easily extended or adjusted as and when necessary.

There are several types of loans to choose from, including the following.

What are the different types of church building loans?

There are several different loans that you can opt for, which all depend mostly on factors such as your credit score, what you can afford to pay and security that you have.

Mortgages

The most common form of loan for a church building will be a mortgage, which is when your bank effectively pays for the property, and then you pay the money back over a set period.

At the end of your mortgage, you will own the building entirely. However, you can still make changes and decorate, as well as choose how you utilise your property while you pay your mortgage.

Often, a mortgage will be for properties that cost over $70,000. And, might need security which includes anything from a personal residence to a vehicle.

Long term vs short term

Both short and long term loans are often available to customers, which usually dictates how much you end up paying back in total.

For instance, a short term loan means that you pay back your loan quicker, which equals a higher monthly payment.

But, the interest rates are usually high too so the bank can make some money.

Longer term loans, on the other hand, means that you pay back a lower amount of money over a more extended amount of time.

However, this will usually mean you pay back more money in total.

Unsecured vs secured

Another factor that might go into your loan is also whether you have one which is secured or one that is unsecured.

A secured loan is when you put up something as collateral, which can often be a property, a vehicle or if you have a guarantor, it will mean that your friend or family member takes responsibility for funds you don’t pay back.

An unsecured loan, on the other hand, does not require any security, so it is usually more expensive.

Construction loans

Construction loans are loans which are used specifically for funding a new building or expansion project, typically a short-term solution until there is long-term funding acquired.

There are generally two types of construction loans; stand-alone or construction to permanent loans.

The first is a loan which is useful for putting a smaller downpayment on your new building, which can be beneficial when you are setting up a new home, but you already have an existing home, or if you are building new business premises.

However, the disadvantages to this loan are that you won’t have a mortgage rate locked in for after your construction loan, and you will need to close twice.

On the other hand, construction to permanent loan means that you have the initial construction loan, but then you also lock in rates for a mortgage as well.

You will only need to close and pay the appropriate fees once, which could make it a preferable option for your church financially speaking.

Typically, your mortgage will be between 10 and 30 years in length, depending on the initial deposit you put down as well as your ability to make monthly payments.

Line of credit

Traditionally, a line of credit loan will be a short-term solution which can be used for smaller projects, quick fixes and a temporary influx in funds.

These types of loans might be available for up to 25 years, secured via your mortgage and you need to have at least three years of financial documentation to apply.

You can generally expect a range of options for a line of credit loans, such as amounts between $25,000 and $100,000, short term and long term options as well as unsecured and secured choices.

How can they benefit me?

So, how can a church loan benefit you?

Taking out a loan for your church building, whether it’s an expansion or a brand new build, can alleviate the financial pressure as you won’t have to pay for everything up front.

Usually, it will require a deposit, but then manageable monthly repayments.

Here are some of the other benefits that you might be able to enjoy:

✔ Start work on your building sooner

✔ Spend less money up front

✔ Focus on more important elements

✔ Design a bespoke solution for your church

✔ Gain a tailored loan which suits you

✔ Apply for a loan online

How do church building loans work?

With some church loan providers, these are the steps involved in taking out a loan to be able to start building, or extending, your church.

Step 1

First of all, you need to establish how much you need to spend.

Sometimes, the worst thing you can do is not borrow enough, in which case you won’t be able to complete the building for your new church.

On the other hand, borrowing too much can end up leaving you with an unrealistic bill to pay, which you might not be able to afford.

Step 2

Next, you need to keep track of and provide your church’s last few years of both profit and loss statements, so your provider can see where you are financially.

This can help them to ascertain whether you can pay back what you are borrowing, and make sure that it won’t bankrupt your church.

Step 3

You’ll need to try and figure out what expenses you will need to pay for one-off uses, such as equipment or materials for example.

Step 4

Now, you need to calculate and provide information regarding your church’s net income, after you subtract your expenses from gross income.

Step 5

Once you have completed all of these steps and had the information that you need, you can now apply for the loan!

It can sometimes take hours, days or even months to apply for a loan successfully and get the funds, depending on where you look and who your loan provider is.

What do I need?

Here is a quick rundown of what you’ll need.

• A figure of how much you need
• Profit and loss statements
• Your churches accounts
• Details regarding expenses
• Loan application

Sometimes, churches choose to approach a specialist to help with applying for your loan, as they will know exactly what you need to do.

This can take away some of the stress and strain associated with applying for a loan.

How much can I borrow?

Typically, your church will be able to borrow between four and six times your gross tithes and offerings, before considering expenses.

Do I need a substantial credit history?

Luckily, some providers won’t require you to have a substantial credit history, especially in the case that you can put up security as collateral.

Credit histories allow your lender to see how reliable you are, and how likely you are to pay back the money that you have borrowed.

If you have security, this can give your lender peace of mind that you will pay back your funds regardless.

What circumstances will I need to apply for a loan?

• To not have any outstanding loans that exceed 80% of the property value
• Have existed for around three years or more
• Be an incorporated church
• You need to have a stable attendance or increasing attendance over the last three years
• Be current on all of your existing financial obligations

What is the average interest rate of a church loan?

On average, your church loan will have an interest rate of between 4% and 5%, depending on the lender, your churches finances and possibly your credit history too.

Top 10 church loan providers

1. American Church Mortgage Company

Type: Mortgage company

Loan amount: $300,000 to $5 million

Founded 1987 by a group of investment bankers, lawyers and accountants who have specialised experience in working with churches to obtain finance.

They claim to provide customers with a low-cost solution which is tailored specifically to your needs as a church.

✔ 20 to 25-year terms

✔ Fixed rate interest

✔ Non-variable rates

✔ No balloon payments

2. AG Financial Solutions

Type: Mortgage company

Loan amount: Bespoke

AG Financial Solutions offers its customer’s church loans, investments, retirement, planned giving and insurance, with many different tools to help you find out how much you can borrow.

They are one of the largest providers of church loans, which means that they can offer a wealth of expertise and experience.

✔ Construction consultation

✔ Dedicated support

✔ 75 years of experience

✔ Competitive rates

3. Christian Investors

Type: Mortgage company

Loan amount: Bespoke

Christian Investor Financial Loans provides funds for churches who need to expand their congregation and empower their communities.

They specifically lend money to EFCA churches, the Association of Free Lutherans, the Conservative Congregational Christian Conference and the Presbyterian Church in America.

✔ Ministry-focused

✔ Experience in Church lending

✔ Custom and personal

✔ For both small and large communities

4. Thrivent

Type: Mortgage company

Loan amount: Bespoke

Thrivent offers finance specifically to Christian churches and organisations, that can help your ministry and community to grow.

They have a range of available solutions, which can help your specific needs and requirements.

✔ Refinance existing mortgages

✔ Purchase new properties

✔ For construction or renovation

✔ Repairs and equipment

5. American Church Finance

Type: Boutique brokerage

Loan amount: Bespoke

American Church Finance is a multilingual mortgage broker, who provides both financial, bookkeeping and mortgage services in English, Creole and German.

Located in Atlanta Georgia, American Church Finance is a broker who specialises in providing finance for all religious groups.

✔ Bookkeeping services

✔ Revenue and expenses

✔ 15-year loan program

✔ 20-year loan program

✔ 25-year loan program

6. The Genesis Group

Type: Alternative finance provider

Loan amount: Bespoke

The Genesis Group is a church loan and finance provider who can help your religious group to acquire loans which have a value that can be up to 75% of the value of your church.

They can help you to obtain both short and longer-term loans, as long as you can provide both personal and financial information about the church and its leader.

It’s important to remember that The Genesis Group have some strict parameters, such as the fact that your annual debt service shouldn’t exceed a third of your income.

✔ Church mortgage loans

✔ Church refinancing

✔ Construction loans

7. Lutheran Church Extension Fund

Type: Church loan provider

Loan amount: Up to $1,800,000,000

The Lutheran Church Extension Fund is a church loan provider who can help you to empower your ministry, find finance for your congregation’s needs and help you to acquire a new site or improve your current one.

They offer a wide range of loan solutions, starting from rates as low as 2.250% APR.

✔ Secured loans

✔ Unsecured loans

✔ Construction loans

✔ Construction bridge loans

✔ Specialised ministry loans

✔ Jumpstart loans

8. CDF Capital

Type: Church loan provider

Loan amount: $750,000,000

CDF Capital is a church loan provider who can offer loans of up to $750,000,000, and obtain different types of loans such as unsecured and bridge loans.

They have lent over $1.75 billion in funds, 950 loans and partnered with 850 ministries and individual churches.

✔ Bridge loans

✔ Unsecured loans

✔ Land loans

✔ Lines of credit

9. Griffin Church Loans

Type: Church loan provider

Loan amount: $24,500,000+

Griffin’s Church Loans is a church loan provider who can offer their customers loans of high value, sometimes worth tens of millions of dollars.

They claim to give you entirely obligation free quotes, and that they will review your application within 24 hours.

✔ Church financing

✔ Church construction loans

✔ Funeral home financing

10. America’s Christian Credit Union

Type: Church loan provider

Loan amount: Bespoke

America’s Christian Credit Union are a non-profit church loan provider, who can offer a variety of loans which include those for ministries as well as construction loans.

You can benefit from lower interest rates, low monthly payments as well as in-house decision making, with no brokers or third parties.

✔ Ministry loans

✔ Real estate loans

✔ Church vehicle loans

✔ A line of credit loans

Conclusion

In conclusion, there are a few options open to churches that need building loans, as long as you can provide adequate evidence of your status and your finances are in order.

Do you want to learn more about church buildings?

Or find out about building elements?

Take a look at the Green Building Elements guides here.