Not all banks will do it!
Former churches and places of worship are big business for developers and investors.
But what if you want to buy a place of worship loan to, you know, worship?
Although these buildings aren’t typically zoned commercial, they are usually purpose-built which means they fall under strict lending policies with most lenders.
How much can I borrow?
- Church building (freehold): Borrow between 50-60% of the property value or up to 100% using a guarantor.
- Loans over $5,000,000: Considered on a case by case basis.
- Low doc commercial loans: Not available.
- Interest rate: Discounts will vary but you can get an idea on the commercial interest rates page.
- Getting approved: Subject to the size of the organisation and the level of regular donations received.
Places of worship are considered to be specialised commercial properties because they’re purpose-built and have a very limited market of buyers.
We can help you put together a strong case with the right lender!
Discover if we can get you approved by calling us on 1300 889 743 or by completing our online enquiry form today.
Why speak to us?
Getting approved for a place of worship loan comes down to presenting a strong business case.
For freehold churches and temples, in particular, only a couple of our lenders will consider these specialised properties.
With help from one of our specialist mortgage brokers, you can maximise your borrowing power or borrow at higher LVR (Loan to Value Ratio).
We can even help to negotiate for a discounted commercial interest rate on your behalf.
When it comes to purpose-built commercial real estate, it pays to have an expert in commercial lending policy on your side.
Why are banks so conservative?
Banks are very risk-averse so, if your organisation was unable to meet its loan repayments, for whatever reason, the bank would be forced to sell the property.
The problem is that it can be difficult to sell a place of worship quickly because they only appeal to a certain group of buyers.
In addition, prices can fluctuate significantly depending on demand so banks will be concerned that they won’t be able to cover their losses.
The nature of a religious organisation
Places of worship are purchased and held at the organisational level.
Unlike other types of business and commercial models, there is a high level of reputational risk when it comes to religious groups.
Whether it’s because of a scandal or simply the result of a natural membership downturn (a very real threat faced by many religious groups), donations can easily dry up.
Donations are the main source of funding for places of worship so without a strong following and a good track record, a bank will not consider your organisation for finance.
Can all places of worship be considered?
One of our lenders will consider all types church properties including:
- Mosques (Masjids)
- Hindu temples (Mandirs)
- Buddhist temples
What can I use as security?
- Equity in existing residential real estate owned by the organisation or borrowing entity.
- General Security Agreement (GSA) over the security property and any included assets.
- Directors’/shareholders’ guarantee, although it depends on the organisation type of the church.
One of our lenders will consider your place of worship loan as a non-recourse mortgage.
This is a common sense approach since religious organisations are often run by a committee made up of members that have no financial interest in the place of worship.
How do I prove my income?
Churches and other religious organisations are considered as charities only if they’re registered with the Australian Charities and Not-for-profits Commission (ACNC).
Because of this, your organisation may be exempt from paying tax.
Without tax returns, how else can you prove your income from donations and fundraising?
One of our lenders will want to see the last 3 years financials for the organisation in the form of bank and profit and loss statements.
They will also want to see details of your asset to debt position.
All of these documents should be verified by a qualified accountant.
Basically, the lender wants to see that you’re receiving regular donations and that you have sufficient residential real estate to use as security for the mortgage.
It’s critical for the bank to understand the size of your membership.
Smaller organisations with possible reputational issues and no longevity will be declined.
Larger groups with a strong following and a good track record of regular donations will have a better chance of getting approved.
How is your organisation structured?
When applying for a place of worship loan, you’ll need to get buy-in from the board of directors and administrators.
However, your legal ownership of the property will vary depending on your church ownership structure.
A religious group can either be an unincorporated entity, an incorporated association or a company limited by guarantee.
Generally speaking, we can only assist private organisations operating as an incorporated identity since it allows the place of worship to held in the name of the organisation.
This is important because the borrowing entity must be the same owner on the property title.
The good thing about an incorporated entity structure is that it gives your organisation a better chance of qualifying for government grants to undertake capital works on the property.
Your organisation may even qualify for GST concessions when buying and selling the property.
Please check the Australian Taxation Office (ATO) website for specific information regarding GST concessions that may apply.
Zoning for places of worship
Churches and temples can be located in many different types of local council zoning including:
- RU1 Primary production.
- RU2 Rural Landscape.
- R2 Low-Density Residential.
- B1 Neighbourhood Centre.
- B2 Local Centre.
- B3 Commercial Core.
- B4 Mixed Use.
- B5 Business Development.
- S2-SP1 (many heritage-listed church buildings fall under this category).
Banks can be more conservative with churches that are purpose-built and zoned purely for commercial or business purposes.
It can severely limit the number of buyers.
If the place of worship is zoned R2, then it opens up the market to residential buyers and investors who are looking for buy a church conversion.
Can I get a church conversion loan?
Converted churches and warehouses are very popular among homebuyers, and many investors see former churches as a renovation opportunity.
If you’ve arrived on this page looking to get a loan for a converted church, we may still be able to help you.
We’ll need to check the zoning of the property to see if it can be considered for residential use.
It also has to be clear that the building can be easily converted into a residential property.
You can usually show this with a building contract that details your renovation plans.
It’s also essential to find out whether the property is historically or heritage-listed with your local council.
This may prevent certain works from being undertaken, again, limiting the number of potential buyers.
Get in touch with one of our mortgage brokers and tell us about the property you’ve found.
Looking to develop the land?
If you’re looking at a former church as a development opportunity, we can help you get approved for a loan.
Your ability to get approved will depend on the location and zoning of the property as well as the work you intend to undertake.
Discover if you qualify!
We can let you know if you qualify for a place of worship loan!
Give us a call on 1300 889 743 or complete our free assessment form to speak with one of our mortgage brokers about your situation.