Church and Charity Mortgages Explained

If you’re involved with a church or a charity and are looking at ways to purchase a building or a space for the organisation, you’ll want to find ways to finance the move in the most affordable and workable way.

If you’re wondering whether it’s possible, what’s involved in both the lending criteria and application process, and where to look for the right advice – read our in-depth guide below for everything you need to know.

Can churches and charities get a mortgage?

Yes, it’s certainly possible. Churches and charities are considered commercial entities when it comes to financing; therefore, as widely different and varied as commercial properties are, so too are the mortgage products and deals that come with them within the lending sector.

This means there are no set mortgages just for churches and charities, and while there are certainly specialist lenders out there who consider individual circumstances for both, the exact features of such mortgages are not clear-cut. Because of the complexities involved, seeking assistance from a specialist broker in this area, like the ones we work with, is advisable.

Eligibility criteria

Lenders will approach such commercial mortgages on a case-by-case basis. While lending to a church or charity is very different from individuals buying a home, eligibility is similar in that, ultimately, affordability is the cornerstone of all financing sanctions.

Lenders will be interested in how comfortably you will be able to make the repayments and eventually pay the balance. This is where the strength of your application will come in.

You will need to prove how you function as a business, with business plans, how far your fundraising goes and how you’re generally funded, whether your finances are consistent, and what your intentions are going forward.

What deposit you’ll need

Lenders will consider you far more attractive as a borrower the bigger your deposit is. That said, plenty of lenders out there might stretch to an 80% loan-to-value (LTV) ratio. However, this might come with higher commercial interest rates or lower term lengths.

There may also be discounts on mortgages if you can stretch to a higher deposit figure. For example, the specialist lender for churches and charities, Kingdom Bank, has been known to offer lower interest rates for applicants with a 60% LTV or less.

How a broker can help you get a church or charity mortgage

Advisors with experience and specialist knowledge of certain corners of the marketplace come into their own in areas like this. Getting a mortgage on unconventional properties can be challenging at the best of times, and when you consider something like historic buildings, a complex financial status, or unusual administration, the process is lengthy, complicated, and precarious.

Our advice is to find an expert and lean on them for guidance and support through your application and, crucially, to find the best deals with the right lenders. This will also save you time and money during the negotiation phase.

Which lenders offer these loans

You’ll likely find that many mainstream high street banks and building societies work with charities to some degree, but perhaps not really with churches. However, there is a small number of very niche lenders out there who either focus on the church and charity market exclusively or provide these kinds of mortgages as part of their wider offering.

An example of these is the already mentioned Kingdom Bank, MCA Funding for Churches, Stewardship, Church Mortgages, CAF Bank, Reliable Bank, and Ecology Building Society, which works with religious and charitable groups that are environmentally minded or offer sustainable benefits.

What interest rates to expect

As you’d expect with any kind of commercial mortgage, the risk is deemed higher by lenders, and so are rates to offset this. And like all commercial mortgage rates, there is no fixed scale on what you might pay.

Typical rates could be between 2% to 3% above the Bank of England base rate, possibly higher if you want to take on a high LTV or your credit rating is sketchy.

Other ways to finance a church or charity

Many churches and charities enjoy plenty of goodwill and support, with some having strong support from the community and other large organisations and benefactors. If a mortgage is not an option or you’d prefer to explore other ways of financing, there are entities out there who could help with loans, grants, or donations.

Get matched with a commercial mortgage specialist

When it comes to more complex and unique mortgages, we can find the right experienced specialist for your circumstance and form a partnership that allows you to find the exact advisor for you.

Our partner brokers are reliable and impartial and pride themselves on doing a five-star job every time to secure the best mortgage outcome for you. If you want to see what invaluable service you can get, contact us today for an initial chat on 0330 818 7026 or make an online enquiry today.