Know Everything About Refinancing Your Church Mortgage
When your church is looking for complete financial freedom, you need to see your church mortgage from a new perspective. It's time to ascertain whether you want to continue with the current mortgage or need refinancing for the loan.
Refinancing is an excellent option when you need increased cash flow for managing ministry activities every month. Here's everything to know about refinances before you go for it.
Why Do You Need Refinancing on Your Church Loan?
There are misconceptions that refinancing is only required when you want to lower your interest rates. The truth is that you may want a refinance, even when interest rates remain the same to improve your church's financial health. A long mortgage term helps the ministries to pay their debts quickly in comparison with other short-term loans.
The main scenarios when you may need a refinancing option are:
- If you have a balloon note pending
- When the interest rates are low
- If you want to lower the period of amortization
- If you need to increase the time for the fixed interest rate
How to Find the Best Refinancing Option for Your Church Loan?
A church requires a commercial mortgage, where you need to compare several options to choose the right one. Refinancing helps to pay the closing costs and fees due on your loan.
Depending on the terms of refinancing, you can save a lot on your monthly payments and let the loan pay for itself. That's why you need to find the right type of refinancing option. Here are some tips that can help.
1. Research Your Options in Advance
If you want to be debt-free and pay off your loan balances in a short time, research several options at least 5-6 months before the maturity date of the current note. Look for the loans that come with easy terms and conditions. Prefer simple interest calculations and choose loans that have no intangible state taxes.
2. Ask About the Interest Rate Terms
In some cases, banks call balloon notes as fixed-interest loans. The term can be confusing when you compare it with residential mortgages. In the residential market, a fixed-rate loan has a term ranging from 15-30 years, while a balloon note is a five-year loan with a shorter time.
Also, understand the benefits of adjustable-rate loans applicable to church mortgage. They help you to know how high the rates can go on your loan.
3. Look for a Long Term Loan
When you have an extended amortization period, you get more flexibility to adjust cash flow volatilities. Despite the best predictions, the income of your church might not be stable, and it may be low in some months. When you have a longer loan term with smaller payments, you will not stress the financial budget of your ministry.
4. Pay Your Debts Quickly
If the income of your church is higher than expected in some months, use this extra amount to pay off your debts. However, check with your lender if they have any prepayment penalty on loan. This will save you more money on interest over time.
Whenever you’re looking to plan the finances of your church, evaluate your mortgage carefully, and choose refinancing to save more money.