Church Mortgage: Common Challenges and Solutions

Church Mortgage: Common Challenges and Solutions

Many Americans faithfully pay their tithes, offerings, and other donations to their Church. For example, about 10 million tithers give $50 billion annually to churches and other non-profits. Unfortunately, however, these hefty amounts don’t provide sufficient funding for Churches in the US.

Therefore, church leaders often resort to financing solutions such as mortgages for their projects. So, your church may pay a mortgage for building a larger venue, making renovations, or for their outreach programs. All of that said, Churches run into significant problems when applying for mortgages.

Also, the 2022 fiscal year is slowly drawing to an end, so churches have to evaluate their financial decisions for the next year. Many churches are already preparing their budgets and financial decisions for 2023, as well as examining their upcoming needs and wants.

Importantly, church mortgages are getting serious consideration. So, in this article, we will examine some of the decisions churches will evaluate in 2023. We’ll also look at four common challenges churches face when applying for church mortgages and the solutions.

Ready? Let’s begin.

What Is a Church Mortgage?

You probably already know what a mortgage is. It’s a legal arrangement between a borrower and a financial institution such as a bank. Here, the bank advances the borrower some money in exchange for collateral in the borrower’s property, which could be land or a building.

So, imagine that your church needs an additional $500,000 to build a new auditorium. You don’t have the money, but your current building is valued at over $750,000. In such cases, you can take out a mortgage on the existing property, which becomes collateral for the loan amount.

Therefore, if your church defaults on repaying the mortgage back, the bank can sell off the collateral and recover its money. Usually, mortgages are used for building and renovation projects. But nothing stops you from negotiating a loan for other church objectives.

church mortgage

Types of Church Mortgages

Your church can take out different types of mortgages. But this depends on your particular needs. Generally, we can classify mortgages based on the repayment period.

So, there are short-term and long-term church mortgages. A short-term mortgage means you’ll have to repay the principal and interest within a short period. Usually, this could be five to ten years.

Conversely, a long-term church mortgage can take your church 20 to 30 years before repaying the loan. A long-term mortgage looks attractive because you have more time to repay the money. However, you’ll pay more on the interest in the long run.

Your church can take other types of mortgages. Some of them include the following:

Fixed-Rate Mortgage

A fixed-rate mortgage means your interest rate remains unchanged throughout the repayment period. Therefore, you don’t pay more or less interest on the mortgage amount. Furthermore, your monthly deductions are also static. The advantage of this mortgage type is that it allows your church to plan properly. So, you know exactly how much money you’ll spend repaying your loan monthly.

Adjustable-Rate Mortgage

As the name implies, your financier can review your church loan’s interest rate higher or lower if it’s an adjustable-rate loan. Usually, your interest rate per time depends on the official interest rate. You can thus get a favorable and lower interest rate, which will make your repayment easier. However, there are often guiding limits to how high or low the interest rate can go. This provision in the church mortgage agreement protects both sides from exploitation.

Financial Decisions Contemplated by Churches

Below are some financial decisions churches make each fiscal year:

Situation 1

Have we outgrown our building?

Many churches find themselves near capacity and ready to buy a new home to accommodate future growth. Your church may even start a capital campaign to buy a new building. However, capital campaigns can be lengthy, and interest rates are climbing.

Therefore, your church may want to explore a church mortgage to lock into today’s lower interest rates. You can still raise funds to pay off the church loan early. For example, we closed a church mortgage in Georgia, and provided a fixed 4.0% interest rate for five years. If the church had waited, its interest rate could have been much higher.

Situation 2

Do we need to make any major renovations or upgrades?

Your building may be older and needs to have deferred maintenance projects completed. You may need a new roof or need to repair the existing one. Whatever the repair or renovation, these are all costly items and may require a church mortgage. We also advise carefully reviewing all of your building needs so that you can be preventative and lock into a low-interest rate loan for everything at once.

Situation 3

Is your current loan going to mature in 2023?

Church mortgages are commercial and need refinancing about every five years. The good news is that we have church mortgage programs that include 10, 15, 25, and 30-year fixed rates with no balloons.

Therefore, your church could lock in now while rates are low. Then, you will not have to worry about refinancing again. The bottom line: do not procrastinate on your refinance in 2023. You could end up with a higher interest rate than you have now.

If your church ever decides to get a mortgage, you may be shocked at how much church mortgages differ from other organizations’ procedures. So, you may be discouraged and abandon the loan application process. However, we are here to guide you through the process, so reach out to us today.

Top 4 Church Mortgage Challenges and Their Solutions

If your church is applying for a mortgage, you’ll likely encounter several problems. Some of these challenges will occur in almost any church mortgage application process. A typical example would be evaluating the value of your proposed church collateral.

Therefore, we’ve outlined the top four church mortgage challenges your church may face. In addition, we’ve provided practical solutions to all the issues. So, keep reading to learn what they are.

Finding the Right Church Lender

Finding a financial institution is the beginning of the church mortgage process. If your church gets it right at this stage, the remaining stages will be straightforward. However, your church has little in common with other borrowers like companies. In most cases, the similarities stop at the need for financial assistance.

Therefore, you may find it harder to select the right church lender. A financial institution suitable for a company facing bankruptcy may not be the perfect option for your church mortgage request. Many banks and financial organizations haven’t warmed up to church mortgages and loans. 

So many financiers are still skeptical about the concept of church lending. Getting a lender is already hard, and getting the perfect lender is much harder.


Only proper research can ensure that you get the right church mortgage lender. You need an institution that isn’t just out to make some more money. Instead, your church will be better off with a lender that understands its needs.

Then, you and the financial institution must work together to achieve these goals. Therefore, your church’s objectives and principles must always align with the lenders. As a result, you must check for vital things before choosing a church mortgage lender.

Some of them include the following:

  • The lender’s church lending history. Have they given mortgages to other banks, and how did that turn out?
  • What are the business principles of the financial institution?
  • Does the bank have credible experience in the church lending sphere?
  • What stages and options does the bank explore upon mortgage defaults?
  • Is the bank ‘partial’ to a particular type of church?

The answers to these questions will help you determine whether you and the church lender are a good fit. If your interests clash with a bank’s, it’ll be best not to force the relationship. Although it may be hard, you can still find the right church mortgage lender for your church project.

Non-Refundable Status of Church Mortgage Processing Fees

You’ll most likely pay an application fee when you apply for your church mortgage or other loans. This money gets the ball rolling and shows the bank or other financial institution that you’re serious about getting the mortgage. But many church leaders don’t know that these processing fees are non-refundable.

Therefore, they apply for church mortgages across multiple financial houses. This means that they must pay multiple application fees for all these transactions. Churches unknowingly engage in this process, often believing they can get a refund from other financial institutions after choosing one lender.

Sadly, the banks are clear in their mortgage application conditions, meaning you will not get your money back. In addition, if you make mistakes in the mortgage application process, you may have to pay further fees.


The first step to overcoming this challenge is understanding the refund status of your church mortgage application fee. You can find this information in the paperwork the financial institution sends you. However, not all vital data is immediately clear from the initial documents.

Therefore, speaking with the officer handling your mortgage application will be best. In addition, it’ll help to know the implication of making mistakes during the mortgage application process. For example, will you pay extra fees, or will the lender view it as a mere irregularity?

Whatever answer you get, it’ll be best to take the church mortgage application seriously. Do not send multiple applications to lenders you don’t wish to follow through with. Avoiding mistakes that could trigger penalties is also advisable.

Improper Documentation

Church mortgage applications require significant documentation. You’ll have to submit several documents to the financial institution, such as:

  • Attendance records
  • Membership data
  • Income records of offerings and tithes
  • Letter of authorization for the mortgage application
  • Record of church leadership
  • Business proposal (projected application of the mortgage sum)

A bank or financial institution will analyze these documents to check whether your church qualifies for the mortgage. Therefore, you must carefully and accurately prepare the necessary materials. Any mistakes can rob your church of the opportunity to get the funding it needs.

Many of these documents are technical and should be prepared in certain formats. Churches thus run into issues when they have to prepare and submit them. There’s more. Attendance records need to be continuously kept and updated, so you’ll run into trouble if your church doesn’t painstakingly prepare and store these documents.


One solution to improper documentation is an early and systematic approach to documenting crucial details of your church. For example, you never know when you’ll need a church mortgage or other external financing. Thus, it’s best always to keep your books in order.

Firstly, ensure you have a record of your church membership. For example, how many people attend your church? How many of them are youths? Are there families among your regular attendees? Banks will need these records to estimate your church’s projected growth.

You must also keep records of your giving. This record will show how your church income has increased or decreased over the years. Therefore, it’ll also help financiers calculate their future financial projections.

Suppose there are documents you should get from organizations or the government, like your Articles of Organization. Then, it’ll be best to collect and keep them early. Do not wait until you need the documents. If you delay, bureaucracy may frustrate you when you need it urgently.

Not Getting All the Money You Need

Even after jumping all the hurdles above, a bank can still refuse to give you the amount of money you applied for. No financial institution is under an obligation to lend you all the money in your mortgage application. But you’ve most likely estimated the cost of the new building project.

So, you also know that $10,000 less than the amount you requested means you cannot execute the project. Why do church lenders do this, you may ask? Well, there are several reasons, including:

  • Your church isn’t creditworthy enough for such an amount of money
  • The collateral isn’t sufficient security for the mortgage amount
  • Your repayment structure is only feasible for a lower amount
  • You have unpaid loans with different lenders

Whatever the case, getting only part of the money you need is unhelpful. If you don’t find a way to complete the sum, you may be unable to begin the project.


There’s no definite solution to getting less mortgage than you applied for. But you can explore some options. Firstly, you can raise the funds from Members through donations and loans.

Additionally, you can source money through alternative means. Church mortgages aren’t the only external financing your church can get. For instance, you can get a church loan that doesn’t require collateral. If you have existing loans, you can refinance them and get lower interest rates. Then, you invest the money you save in your new church project.

You can also raise money internally to make up the sum. So, the following options can help you:

  • Church fundraising events
  • Running a bookshop or church printing press
  • Asking for special donations for the project
  • Diverting funds from other less-pressing projects

All the extra cash you can come up with through these processes will greatly increase the total amount of money you have for the project. Moreover, you wouldn’t incur further debt to achieve your church-building goals.

How to Get a Church Mortgage

The church mortgage application process is a lot like what’s obtainable for other commercial organizations. So, your church will do the same things any other mortgage applicant will do. The steps below are thus vital to the mortgage process.

Applying for the Church Mortgage

You must first apply to banks or other financial institutions. This will be after your church must have researched and selected a church mortgage grantor. The application procedures differ across finance houses, though.

But it’ll generally involve submitting your mortgage application documents to the bank. Notably, if the loan is approved, then the lender will order an appraisal report.  This report will specify the value of the property your church is placing as collateral. The figure in this report also directly influences how much you can get as the mortgage sum.


Banks usually run several investigations before moving on with a mortgage application. These due diligence operations help them ensure that the applicant is genuine and that they can repay the loan. So, the first step will be investigating ownership of the property.

The bank will have a title report run to determine that the property is owned by the church seeking the loan.  Financial institutions also conduct physical inspections of the collateral. This helps them ensure that the property is in good physical condition.

Credit Checks

Mortgage lenders may also run credit checks to determine whether the repayment history of other debt is good.   Here, the bank wants to know if you’ll be able to repay the mortgage within the stated period. So, they’re looking at your Church’s financial history to determine if you’re a high-risk borrower.

So, the bank officials will get information on your credit status through the following:

  • Credit history data and other publicly available information
  • Church bank account details
  • Existing loans
  • Mortgage collection and repayment history

A good mortgage credit score is often a subjective matter. We mean that it depends on the financial institution. What will fly with one lender may be unacceptable for another. But generally, anything that suggests you may not have the money to repay the loan or skip repayment will lead to a denial of a mortgage application.

Church Mortgage Approval

Suppose you scale all the application hustles. Then, the church lender can approve your mortgage application. An approval means the bank will offer you some money in exchange for taking the property as collateral. This could be the exact sum you requested or less.

Whatever the case, this offer will also come with an interest rate per annum. Then, the bank will fix the repayment period, which could be short-term or long-term. Next, you’ll watch for the breakdown of the principal and interest into monthly payments.


So, you’ve reached concrete agreements with the church mortgage lender. Now, it’s time to close the deal, take your money and start your new church project. Of course, you’ll need a lawyer throughout the mortgage application stage. But they become more important at the closing stage.

The lawyers draft the mortgage deed and have both parties sign the contract. This deed effectively protects the lenders interest in the property.

Get the Best Church Mortgage Assistance Today!

The fiscal year is winding down, so if you have not started, it is time for your church to start making decisions for the new financial year. This includes evaluating your financial decisions in 2022 and deciding to do better in 2023. Church mortgage agreements will thus naturally come up in this discussion, especially if your church needs money.

So, are you seeking outside support for your ministry’s financial needs? If you are, then a church mortgage is an excellent option. But applying for church mortgages is a difficult and complex process. In addition, your church will face unique problems that other mortgage applicants wouldn’t experience.

But rather than give up, it’ll be best to get expert church mortgage advice. Our team has helped thousands of churches with church loans to execute their projects. Therefore, we can walk you through the mortgage application process, simplify it and prevent you from making mistakes. All you have to do is contact us today.

We also have resources on several church financing topics. So, read our blog here.

Editor’s Note:  The post was originally published on Oct 20, 2017, and has been completely revamped and updated.

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