FAQS(Frequently Asked Questions)
What are First Mortgage Church Bonds?
In simplest terms, first mortgage Church Bonds are the promise of a church or non-profit to repay investors for loaning the organization money. To secure investors, the organization pledges its real estate as collateral upon the bonds. Just like your home loan, the pledged collateral is secured by placing a first mortgage lien or deed of trust upon the real estate until the bonds are fully repaid. In the event the organization fails to honor its commitment to repay investors, the pledged collateral will be foreclosed and sold in order to repay investors.
Why Do Churches Issue Bonds?
Churches issue bonds to finance new construction, remodel, expand existing facilities, refinance existing debt, and to purchase land and buildings. Most importantly, Church Bonds have been and continue to be a reliable method for churches to consistently obtain TRUE, long term financing. Church Bond financing locks in a church's interest rate AND its mortgage payment until the bonds have been repaid in full. Church Bonds are used by churches to protect against interest rate increases or increases in their mortgage payment. That is why we call it true, long term financing. This is also due to the fact that the vast majority of conventional loans only provide a fixed interest rate for three to five years. When the renewal date comes up on a conventional loan, there is usually a loan provision that allows the lender to adjust the interest rate either up or down, depending upon the level of interest rates at the time of the renewal. Further, there is usually a loan provision that allows the lender to refuse to renew the conventional loan.
Which Churches Issue Bonds?
Churches dedicated to strengthening the moral foundation of America and who promote Christian values, principles and teachings are the only churches we assist in issuing Church Bonds!
How does a church pay the principal and interest on the Church Bonds it issues?
A church makes weekly or monthly mortgage payments into an account held by an independent Trustee. The Trustee is typically a State or Federal Bank and the account used to hold the church's mortgage payments is called a "sinking fund" account. Whenever interest or principal payments are due to be paid to investors, the Trustee (acting in the capacity of Paying Agent) automatically pays investors their scheduled principal and interest payment. Also, so long as there are bonds that have not matured, the Trustee monitors the church's payments and continues paying investors until the church has fully repaid each and every investor.
Are Church Bonds Safe Investments?
All investments have risks and the performance of any investment cannot be guaranteed. However, we have underwritten hundreds and hundreds of churches since 1989. It is important to remember First Mortgage Church Bond offerings are secured with recently appraised real estate collateral. Our reputation with investors and churches across America was earned by carefully evaluating each church and consistently employing financing principles and practices before underwriting ANY Church Bond offering. To familiarize yourself with some of the typical risks associated with Church Bonds, we have included a section on our website called "Risks". To learn of the risks for any specific Church Bond offering, always read the prospectus!
In what amounts are Church Bonds sold?
Bonds are sold for a minimum of $1,000 and in multiples of $250 thereafter.
Do I pay a commission when purchasing a Church Bond?
Investors do NOT pay a commission when purchasing Church Bonds. This means every cent of your investment earns interest from the day you purchase your bonds! Any commission or fee that may be charged pertaining to your investment is paid by the issuing church.
How Long Must I Invest My Money?
With few exceptions, Church Bonds are offered with multiple maturity dates called "serial maturities". Maturities normally begin at six months and extend in six-month intervals thereafter. Investors have the option to select any maturity date or several maturity dates from six months to 25 years or whatever the time span for the bond offering happens to be. Some bond offerings are for 10 years, others 15 years, while most are 20 years. Typically, investors spread their investment over various maturities.
What Determines the Interest Rate I Earn?
Unlike many investments, the interest rate you earn on Church Bonds has nothing to do with the AMOUNT of money you invest! Church Bonds do not discriminate. Small investments can earn the same rate as large investments! Since Church Bonds are offered with serial maturity dates, you will find the longer maturities pay a higher rate of interest. Because of this nice little feature, you have the option of picking your interest rate. For example in any specific bond offering, the interest rate offered on a 1-year bond will be less than on a 7 1/2-year bond. Likewise, a 20-year bond will pay an even higher interest rate. Therefore, YOU determine the interest rate you would like to earn depending upon your investment goals and bond availability.
Will the Interest Rate on My Bond Vary?
No. Each Church Bond has a fixed interest rate and a stated maturity. Interest payments on simple interest bonds underwritten by Great Nation are typically paid quarterly, but sometimes semi-annually. No interest payments are paid to investors of compound interest bonds until the bond maturity date. However, interest is credited and compounded on these bonds semi-annually.
How do Church Bond Yields Compare?
Generally speaking, First Mortgage Church Bond yields are comparable to commercial real estate loan interest rates. However, when comparing yields you must consider the differences and risks of any investment including the fact Church Bonds are not insured against loss.
Are Church Bonds Liquid?
Church Bonds are considered illiquid investments by the Securities & Exchange Commission. However, as a service to our clients, Great Nation may market bonds from clients needing to sell their bonds prior to maturity. We are not an official market-maker for Church Bonds and are under no obligation to purchase any bond prior to its maturity date. Selling your Church Bonds in this manner is called trading on the Secondary Market.
There are costs and risks associated with secondary transactions and some of these are discussed in our prospectus. More times than not, any quotation we provide is marked down five percent (5%) of the current value of the bond or we may simply charge a five percent (5%) commission. This mark down can be higher, lower or could be substantial, depending upon market conditions and other factors present at the time of the transaction. Our licensed securities agents are available to explain these as well as other considerations to you. There can be no assurance we will be successful in marketing any bond on the secondary market.
Can I invest my IRA or SEP in Church Bonds?
Absolutely! The IRS has determined Church Bonds are qualified investments for your IRA, SEP, and various other types of retirement accounts. If your current IRA trustee can not assist you in acquiring Church Bonds for your retirement account or simply refuses, we will help you set up an IRA with any number of IRA trustees experienced in handling Church Bonds for their clients.