Games make sense and are easier to play when you know the rules. The same is true when it comes to refinancing your ministry’s mortgage. And the economic challenges of the past decade have prompted significant changes in lending requirements. If you’re looking to refinance, here are the rules of the game today.
Don’t assume you can refinance.
Refinancing today is a more complex process that amounts to qualifying for a new loan, but the “rules of the game” are well defined. The realities of the marketplace have changed since you secured your original loan, as have your organization’s financial realities. Your job now will be to demonstrate that you can handle a new loan. The “rules of the game” will require that:
- Your cash flow meets specific requirements.
- Your monthly cash reserves are adequate for your organization, meaning they don’t dip below a certain minimum.
- You have sufficient collateral to support the size loan you want.
Count the cost.
Qualifying for a loan means demonstrating the ability to handle not only the monthly payments (based on the interest rate you’ll pay) but also the expenses of securing the loan in the first place. These expenses include things like appraisals, loan fees, cost of required improvements and cash required at closing. Each loan scenario is different, so the costs and their amounts vary widely. Start by meeting with a ministry financing expert who can walk you through the process.
Look at your leadership.
You need to do this because lenders will. From their perspective, a ministry loan isn’t only about numbers. Equally important are the people who oversee the organization. Have they demonstrated a commitment to meet financial obligations? Are they realistic about how much debt the organization can handle? Are they careful about keeping the organization’s mission primary, never compromising it by over-borrowing? And is a succession plan in place in case the senior leader leaves or is suddenly unavailable?
It’s easier to learn the rules of a game from someone who’s good at it. If you’re thinking about refinancing and would like to meet with a member of ECCU’s ministry financing team, start here.