PASTORS AS HOMEOWNERS
What are the advantages of a pastor owning his own home rather than living in a church owned parsonage?
For over 24 years I have advised churches to get out of the parsonage business. I think it is very important to get a pastor into his own home as soon as possible for many reasons.
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Retirement - owning a home at retirement is a key ingredient to retirement planning. |
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Security - for his family, particularly his wife. Privacy - they can decorate how they want -it's home. |
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I think it tends to add to longevity - the family feels more attached to the community because there's a stronger sense of belonging. |
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Tax purposes - income tax law provides for generous benefits to the pastor who is buying his own home. Federal and state income taxes are greatly reduced and sometimes eliminated due to the housing allowance and double deduction for mortgage interest and real estate taxes. (Unfortunately, it has no affect on the pastor's most burdensome tax, his self-employment tax.) |
How does a church which already owns a parsonage, sell the parsonage to its pastor?
The church sells the parsonage to the pastor. The pastor assumes the balance of the mortgage and signs a note for the difference between the selling price and mortgage balance, to be paid with or without interest at a future date, or when residence is sold.
How does a church get its pastor out of the parsonage and into his own home?
The Pastor purchases a home through Conventional Financing. The down payment is acquired from the sell of the parsonage to be repaid with or without interest at a future date or when residence is sold.
How does a church
which does not own a parsonage get its pastor into his own home?
There are three ways this can be accomplished:
1) The church purchases the home and sells it to the Pastor on land contract using the church assets as collateral. 100% financing is not unusual*.
2) The Pastor purchases a home through Conventional Financing. If the church cannot supply the down payment, it can be acquired from individuals (i.e. church members) with interest* and principal payments deferred, but interest accruing* until home can be refinanced (i.e. after five years when Pastor can afford larger mortgage payments.
3) A building program can be timely. More bonds can be sold or additional financing secured to be used as a loan to the Pastor for the purpose of buying his home.
* In the past loans in excess of $11,000 would require interest be assessed. However the IRS no longer requires interest be assessed for a pastor with less than $1,000 of investment income (interest, dividends, capital gains, etc.). If the pastor has more than $999 of investment income, interest must be assessed on loans over $11,000. You need an interest rate, which is equivalent to the federal discount rate.