April 03, 2019
There is no one answer to this question that fits every situation. 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 that expense can be compounded if the move is to a lower-paid appointment, or if the move causes an employed spouse to lose employment and income.
Tips on Buying, Selling & 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 ways to lower the financial risks:
Special Resources for Pastors
- Put 20 percent down when you buy. If you don’t have 20 percent available, delay the purchase until you do or buy a cheaper house so the amount you have saved is at least 20 percent of the price of the property. There are good reasons to do this:
- You avoid buying Private Mortgage Insurance. PMI is insurance that lenders require from the borrower when less than 20 percent is put down. PMI protects the lender from loss. PMI typically costs .5 percent to 1 percent of the loan balance but can be more.
- A larger down payment allows more pricing flexibility when it is time to sell. A lower asking price can help speed the sale in a down market.
- You can negotiate a lower interest rate when you put down at least 20 percent.
- 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 which adds to the flexibility to negotiate on the selling price if necessary.
- 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. Again, this will increase 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 (two 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!
The dream of home ownership is often part of a long-term financial plan, either during one’s working years or in retirement. UM pastors have a wonderful mechanism for saving toward such a goal through Wespath’s UMPIP program.
A disciplined practice of saving money every month into this sort of low-cost, tax-free investment program can build the equity to make the dream a reality. Through Wespath all UM pastors have free access to an EY investment counselor who can help set up the right savings plan to accomplish your goals. Learn more about this free service at www.wespath.org.
The Clergy and Church Financial Ministry 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. You may also contact the C2FM director, Chris Bouchard, at (573) 268-4440, or by email at email@example.com.