Apr. 30, 2020
There are many factors to consider, and decisions should be made in consultation with local church leaders, and by seeking the advice of trusted advisors, such as a C2FM financial coach.
In an itinerant system, pastors have more risks than the average person because they may have to move quickly, sell in a down market, or break a lease. These situations can cause added expense, and expenses can compound if the move causes an employed spouse to lose employment and income.
Tips on Buying, Selling, and Renting
The risks of home ownership are offset by the possibility of adding value to your financial situation as your equity grows and/or the value appreciates. If you decide home ownership is for you, here are some things to lower the financial risks:
• Put 20% down when you buy. If you don’t have 20% available, delay the purchase until you do or buy a cheaper house so the amount you have saved is at least 20% of the price of the property. There are good reasons to do this:
- You avoid buying Private Mortgage Insurance (PMI). PMI is insurance that lenders require from the borrower when less than 20% is put down. PMI protects the lender from loss. PMI typically costs .5% to 1% of the loan balance, but can be more.
- A larger down payment allows more pricing flexibility when it is time to sell.
- Interest rate are lower with a down payment of 20%.
• Get a 15-year mortgage. Though the monthly payments are slightly higher, the interest rate is lower and the total amount of interest paid is substantially lower. You also build equity more quickly.
• Buy property in a price range that is affordable for the area and in a location that is desirable to a large number of buyers, which increases the likelihood of a swift sale in the future.
• Keep the house well maintained and put some effort in staging it when it goes on the market.
• Work with a realtor who explains how they will market the property and ask for references.
Leasing or renting a house, duplex or apartment avoids some of the risks (and benefits) of ownership, but may be the right decision for you. A long-term lease (2 or more years) should cost less than shorter periods. Understand the penalties and subletting options for early termination. Negotiate to have the lease end June 30th to align it with the appointive year – just in case!
Special Resources for Pastors
The dream of home ownership is often part of a long-term financial plan. Planning for home ownership is part of a webinar series offered by C2FM called Plans with Purpose. Join us on April 30th at 10:00 am for Should a Pastor Purchase a Home? You can at https://mumf.org/resources-downloads/upcoming-events/. You can also register on this site for Common Sense Investing, which will be on April 14th at 10:00 am, and includes a section on the tax advantages of housing allowances.
The Clergy and Church Financial Ministry (C2FM) provides grants to qualifying pastors for relocation assistance. The application for direct aid can be found on the Missouri United Methodist Foundation website at https://mumf.org/c2fm/c2fm-directaid/ or you can contact the C2FM director, Chris Bouchard, at (573) 875-4168, or cbouchard@mumf.org.