Congregational Meeting Sunday

This Sunday, we will have a short congregational meeting to vote on a proposal to refinance our two existing mortgages into one single one. You might asking, "How did the church end up with two mortgages?" The answer is that when we built the addition onto our existing building, we took out what is called a "construction loan". This loan gradually releases funds to the contractor as the structure is being built. Ordinarily, this mortgage would have been combined with our existing mortgage when the building was completed.

What happened was that when the time came to combine the construction loan with our existing mortgage, the interest rates had climbed to 8.75%. If we had combined them, we would have increased the interest on our existing mortgage by 1.25% (7.5% to 8.75). Obviously, it was better to leave the existing mortgage alone, and simply take on a second mortgage for cost of the construction. The downside was that it more than doubled our monthly payment for our debt to nearly $6,000.00 per month.

Now that rates have come down, we can refinance both mortgages into a single mortgage and lower BOTH rates to 6.75%. This will mean that less money will be spent on interest, and allow us to put more money on the principle of the loan when we can.

Since we have paid tens of thousands of dollars on the principle of our first mortgage, some people have expressed a concern about increasing the length (term) of the mortgage. The proposed mortgage is for twenty (20) years, and the interest rate is fixed for five years. Lengthening the term to twenty years DOES NOT increase our debt at all. As with all mortgages, you pay interest on the unpaid balance every month regardless of the term.

The length or term of a mortgage is determined by how much of the principle you pay every month, not interest. You never prepay interest, only principle. For example, if you have thirty (30) year mortgage, and you pay twice as much as on the principle each month, you will pay it off in fifteen years. Regardless, you still paid the interest on the remaining principle balance every month.

This is an opportunity for the church to greatly improve our finances and our cash-flow. There is no practical reason not to approve this proposal. Without this refinance, it will be more difficult for us to weather the challenging financial times ahead. By paying less interest, we will have more funds to invest in the ministry and growth of our congregation.
That is good the church and for the Kingdom of God.