Church Loans


What is a church loan?

Faith-based organizations of all types (including churches, temples, synagogues, convents, monasteries and private religious schools) fall into a specialized niche of commercial real estate financing. Due to their business structures and nontraditional income streams, these groups often struggle to obtain mortgages.

A church loan has a similar purpose as any other type of commercial mortgage. It can be used to purchase or refinance an existing asset, obtain cash out for expansion or renovation purposes, acquire raw land for development purposes or replace short-term construction debt with permanent financing.

For several reasons, many lenders do not offer church loans. Because religious organizations typically rely on tithes or donations, their revenues are often unpredictable. Lenders often require a personal guarantee, which the religious institution may be unwilling or unable to give. Additionally, in the wake of the Great Recession, many religious groups defaulted on their loans. The stigma of bad publicity associated with foreclosing on and repossessing these community assets keeps some lenders at bay today. 

Who offers church loans?

Traditional banks and credit unions, as well as private and hard money lenders, offer church financing. Local or regional lenders that work within specific cities or states may have a better understanding of religious organizations in their communities.

Like other types of commercial mortgages, church loans commonly have adjustable interest rates. Terms can run anywhere from five to 30 years, although amortization periods tend to be longer and require a balloon payment at maturity. Many houses of worship seek to refinance their loans for this reason.

Mortgage brokers should use to locate financing for various types of properties, borrowers, religious affiliations and downpayment amounts.

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