The most common misconception that most Church's have about financing their project generally revolves around the loan terms that are offered by Christian Loan Lenders. Church financing is simply a branch of traditional commercial financing which offers a fixed rate term of one year to ten years and amortization schedules of 20 years to 30 years. Realistically, the only way to fix a rate for an extended period of time is through Church Bond Financing which will provide a fixed rate in excess of 20 years. However, even though this long-term fixed rate may be attractive due to a reduced risk of interest rate fluctuations this Church financing alternative is not cheap as one should expect to pay in excess of 5 points to obtain this type of Church financing.

I would like to explain the two most common types of Church financing terms as well as the advantageous and disadvantageous of each. The first I will call "Church Bank Financing". Christian loan lenders which are banks or credit unions  will typical offer balloon type loans that have a fixed term of 3 to 7 years ( sometimes 10 years), and amortization schedules of 20 to 30 years. This type of Church financing will provide the best available rates and you should expect to pay between 1 and 1.5 points to obtain a Church mortgage loan. The major advantage of this structure are the low rates available while the disadvantage is because of the balloon the Church must either refinance or pay an extension fee to renew the loan after the fixed terms is over. 

The second type of Church financing structure can be referred to as "non-bank" financing. This will be available from Christian Investment Companies that offer Church mortgage loans that are fixed from 1 year to 7 years, are fully amortized over 25 to 30 years, but have a 20 year term and no balloons. This means that the loan is fixed for a period but then readjusts for consecutive periods up to 20 years. The major advantage of this is their no balloon and the Church does not have to worry about refinancing or paying an extension fee. The disadvantage is that because of the reduced risks the interest rates will generally be be 100 basis points higher. 

As you can see both types of Church mortgage loan terms have benefits and costs and the type chosen will depend on the flavor of the Church. One thing to remember is that regardless of the type chosen the longer you fix the rate the higher the rate will be. 

To learn more about the available Church financing terms please visit me at churchfirstfinancial.org.