How to Do Church Refinancing

Churches often attempt to lower monthly expenses by refinancing commercial mortgages into new loans with lower interest rates. Most large religious denominations offer in-house financing to local parishes. These loans usually have lower interest rates than loans from outside lenders and less stringent underwriting guidelines. Churches that do not belong to major denominations must seek refinancing from banks and other lenders. Typically, banks allow churches to refinance loans using commercial mortgage products. Most commercial mortgages begin with 5 or 10 year fixed rate periods after which balloon payments are due.

• 1

  Hold a meeting with all voting church members. Provide meeting attendees with details of the current mortgage arrangement and an explanation of the financial benefit of refinancing. Most churches require members to vote on major financial decisions. Hold a vote to approve the motion to refinance the loan. Ask the church secretary to produce a document detailing the content of the meeting and the outcome of the vote.

• 2

  Contact your primary bank. Provide the commercial banker with the last two years of tax returns from the church. You must give the banker a copy of the year end financial statement and the quarterly financial statement. Other documents needed include a non-profit resolution that explains the nature of the church, and names the authorized signers. You must provide the bank with the tax-identification number for the church and valid forms of ID for all of the people authorized to sign for the loan. Church signers normally include the pastor, chairman, treasurer and secretary.

• 3

  Hold a second church meeting. Discuss the refinancing options offered by the bank. Some banks offer 20 or 30 year amortizing commercial mortgages, but most only write balloon loans. You must review the church budget to determine the affordability of the proposed monthly payments. Commercial loans have significant closing costs, and your existing loan may have pre-payment penalties that increase the overall cost of the project. Vote on the different loan options to determine a verdict. Provide the bank with a copy of the resolution authorizing you to apply for the loan. Sign a loan commitment letter at the bank on behalf of the church. When the bank has completed the appraisal, you must attend the loan closing to complete the refinance.