Question:

Is it ever appropriate for a church to obtain a mortgage for a property purchase? I attend a small church that is bursting at the seams but the fear of financing keeps us here.

We are renting our current building for $1,000/month with all utilities extra. We have no debts and maintain an account with $5,000.00 for regular operations. We have recently become aware of a large church building for sale at an exceptional price: $350,000. In just over 2 years we have saved $100,000.

Is it prudent to finance the balance if we negotiated the price to where we could pay a third of the price in cash? You can imagine the pressure on my church to make a wise Biblical decision for the next step.

— John, Ontario

Answer:

Thanks for the question, John — it’s great to have readers in Canada. You and your church are in a position that many churches have found themselves in over the years, and it’s great that you are trying to be wise in making this decision.

I’m afraid that you’re not going to like my answer too much: I believe that debt is slavery, and that all ministry organizations need to stay away from it. And some time ago, I wrote an article addressing this exact question: Should churches use mortgages? My conclusion in that article was that they should not, and my opinion remains the same. Still, I’m happy to walk through the particulars of your church’s situation to help shed some light on your options.

I’ve seen a number of churches get in trouble with mortgages in the past: Even though it seems like getting a building of your own is a great move for your church, the financial pressure that debt puts on your congregation can bring your momentum to a halt. I’ve seen more than one church dissolve completely over bad debt decisions like this, and I want to spare your growing church from experiencing this same turmoil.

Starting in a good position

Before we talk about these details, though, let’s discuss some of the good news about your current situation. Your church is in great financial shape — with no debt and a $5,000 operating fund you have total financial freedom, as well as some cushion in case you encounter some difficulty. (If you wanted to be really secure, you should consider increasing your reserves from $5,000 to around six months’ worth of operating expenses, but that’s a suggestion for another post).

The rent on your current place is actually very reasonable — perhaps even cheap — and even though you seem to be full, it’s a good situation. If you were in a higher-rent facility, you would have had trouble saving the $100,000 that you currently have to work with.

Finally, your church seems to be growing, and this is a great problem to have. It may make your weekly services a little cramped, but it’s great news for the Kingdom of God making an impact in Ontario. It’s also a good news for your revenue, as growing membership should result in growing tithes and offerings.

Churches vs. Homes

If you were an individual looking to buy a home, or perhaps even a business owner looking to buy an office or operating facility, financing 67% of the purchase would seem like a good deal. We encourage individuals to wisely use mortgages to buy homes and build wealth, because there are some key factors that make home mortgages much less risky than other consumer debt. But there are also some key differences between homes and churches that make this a problem for your congregation.

The residential real estate market is relatively stable and predictable because home values tend to appreciate over time, and because there is frequent enough turnover that it’s easy to appraise a property by looking at how comparable buildings have sold recently. But churches change hands much less frequently than homes or commercial buildings, which makes them incredibly difficult to appraise. That also makes it difficult to sell your church if you need to quickly liquidate your assets. And even if you did sell, you would have no guarantee of getting all of your money back from the sale.

One reason that we encourage home buyers to get mortgages to buy homes is that home values often rise in predictable ways, and owning a home is a key wealth building tool. But a church isn’t — or at least shouldn’t be — interested in building wealth. For a congregation, purchasing a church building is a “buy and hold” proposition. You don’t plan to sell the building in 15 years at a profit. You plan on being there forever. So the incentive that individuals have to buy homes quickly (in order to maximize appreciation) doesn’t really apply to you in this situation.

Debt is slavery

The bigger problem is that debt is financial slavery, and the Bible specifically warns us against it. If you take out a mortgage — even just $200,000 — your congregation will be obligated to make the monthly payments against that loan, no matter what is going on. If your giving income goes down, your growth momentum stalls or you have some other financial emergency, that mortgage payment can become a noose around your neck, severely limiting the church’s options to make necessary financial decisions. If the problems get too bad, they can even force you “out of business.”

A church building should be a blessing for its congregation. But when debt is involved, buying that building can quickly turn into a curse.

Don’t get me wrong: I want your church to buy a building. But I want you to buy it with cash, not financing. The fact that you have saved $100,000 is a great start. I think you should continue saving — and even ramping up your fundraising efforts — in order to amass the $300,000 to $400,000 that you need to buy a building outright. If you focus your efforts to do this, you might be able to raise the money in just a few more years.

Creative alternatives

There are some other creative options that might help you get around your problems. If you’re truly running out of room in your current space, you could consider running two or more services to accommodate everyone (many large churches have been doing this for years). You could also find an intermediate space — a bigger place that you can rent for a reasonable monthly amount while you continue to save for your own building.

There may also be a creative way to get into this new building now, depending on how flexible the sellers are. You could ask if they would be willing to lease it to you instead of selling it. If they are, they may  consider a “lease to own” agreement, by which you slowly buy them out of the building over the course of several years. You could also set up a lease with an option to buy — in this scenario, you could have a regular lease, with the understanding that the congregation has the option to buy the facility outright at a predetermined price several years from now, when you could theoretically have saved enough money to finance the entire purchase with cash.

If one of these options works, then great. If it doesn’t, don’t despair. God knows your needs, and He will provide for them in a way that is consistent with His principles. Don’t let yourself believe that this is the only building that will work for you, or that borrowing money is the only way to get it. We serve a God with abundant resources, and He will bring you His best in His time if you are faithful to trust him.

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Photo by Taber Andrew Bain. Used under Creative Commons License.