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Rethinking Refinancing

by Mike Boblit

rethink refinancing

October 3, 2016

With interest rates still lingering around historically low levels, we often have conversations with church leaders who wonder whether this would be a good time to refinance their mortgages. You may have the same question. As you try to answer it, here are a few things to keep in mind.

We’re not in Kansas anymore

Just as the Oz that Dorothy’s house dropped into was unlike the world she knew, so the lending world today may be dramatically different than when your church secured its last loan. Before the Great Recession, loans commonly had five-year maturities, meaning after 60 months you either paid it off with a “balloon payment” or rolled it over into a new similarly structured loan. Every refinanced loan came at a cost to the ministry. During the recession, the requirements for refinancing or securing a new loan became significantly more stringent.

Many want to reduce their debt

Yes, we’d all like to be debt-free, but more and more churches today are taking steps to make it happen. For several reasons, feelings about church debt have changed. The financial collapse in 2008 and the recession that followed showed us that excessive debt can cripple a ministry. As a result, the mindset among aging baby boomer pastors is shifting. As they approach retirement and think about handing off the ministry to the next generation, many like the idea of getting their churches out debt or leaving them with less debt.

Today you have new loan alternatives

Today you are no longer limited to loans with 25-year amortizations, 5-year maturities and balloon payments. Now you have the option of a fully amortized 10- or 15-year loan and no balloon payment, which eliminates the cost and hassle of a future loan rollover. In some cases, the rates on these loans can be locked in for the full term or be reset automatically during the term, again reducing the hassle and expense of a renewal or rollover. This kind of loan works well in a variety of situations, including churches with smaller loan balances.

Many churches are finding that this kind of loan is what they’re looking for. The rate is low, repayment is faster. And best of all, it’s the last loan they will ever need to get.

Learn about your loan options with ECCU.

Category: Ministry Matters