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        Updated: April 13, 2023

        Charity Mortgages

        Trying to obtain a mortgage for a charity? It can be done! Find out all the steps you need to take in our in-depth guide.

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        Author: Pete Mugleston - Mortgage Expert, MD

        Updated: March 18, 2022

        With cash flow tight and grant funding in decline, many charities are looking to other sources of finance for purchasing premises, including borrowing through charity mortgages.

        In this guide we’ll talk you through the process of getting a mortgage if you’re a charity, eligibility and deposit requirements, and the regulations you’ll need to comply with.

        Can a charity get a mortgage?

        Yes. Charities are viewed as businesses by lenders and would, therefore, be eligible for a commercial mortgage rather than a residential mortgage. Charity mortgages can be used for the purchase of specialist premises, offices and community spaces, or even to build something from scratch.

        Commercial mortgages for charities are considered high risk, so rates will be less competitive and lenders will require higher deposits than for residential mortgages.

        The Charities Act also sets out some specific regulations for charity lending, including a requirement to take written advice from an expert.

        Because charity income is less predictable than a typical business, and may rely on charitable giving rather than sales, it can be harder to secure a mortgage from a high street lender.

        There are specialist mortgage providers though who understand the complexities of borrowing as a charity and who will look at applications on a case by case basis.

        The best way to access these lenders is through a broker with experience in this type of borrowing.

        Get Started with a Broker

        Maximise your chance of approval with specialist advice from an expert in Charity Mortgages.

        Will my charity qualify for one?

        To find out, you’ll need to check your governing documents carefully before you agree to any borrowing. Sometimes it’s explicitly stated, other times it may be implied.

        If it’s not clear, you may need an order from the Charity Commission that allows you to take out a mortgage. If you’re not sure, best to get in touch with them for guidance.

        The Charities Act lays out strict rules around charity borrowing that can invalidate a mortgage if not followed correctly, chiefly that a charity must get written advice from an expert, who doesn’t personally benefit from the loan, before they approve and sign any documentation.

        This should go into detail about whether the loan is appropriate, if the terms are reasonable and whether the charity can afford it. The mortgage documents themselves should also clearly state that the land belongs to a charity and that the trustees have taken the required advice.

        Your charity will also need to meet the general eligibility requirements for this type of commercial mortgage, which you will find outlined in the next section.

        Eligibility criteria

        As well as the standard mortgage eligibility criteria such as credit history, property value and deposit amount, there are quite a few specifics that a lender will consider when assessing a mortgage for a charity.

        This may be harder to demonstrate for a charity than a business or individual, but there are several things that can strengthen your case:

        • Strong financial history – ideally you’ll have a minimum of 2-3 years of certified accounts evidencing a healthy cash flow and good financial management.
        • Business plan – just because you’re a charity doesn’t mean you shouldn’t be operating with a business head on. Show your lender you’ve done your research and have a solid plan in place to be able to grow your organisation and meet repayments.
        • Income projections – here you can include how the mortgage will allow you to increase income, potentially incorporating a commercial element e.g. through room hire, to bring in some regular, reliable income. Evidencing diverse income streams will demonstrate safer, more sustainable long-term cash flow.

        Clear, strong leadership is key to the sustainability of any charitable organisation and so lenders will want to understand the skills and experience of both the governing body and the core staff team.

        The age of your key trustees could also have an impact on the mortgage term you’re able to secure.

        When purchasing a property for charity purposes, it’s important to think about how the building is fit for purpose.

        Is the location easy to get to, with good transport links and access to nearby parking? Does the building need to be modified to make it accessible?

        Are any general refurbishments required to bring it up to a suitable standard? Lenders will also want to make sure that you have any relevant planning consents, permits and permissions.

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        Deposit requirements and other terms

        The deposit requirements for a commercial charity mortgage typically range from 20% as a minimum up to 50%, with 25%-30% being the average. I

        f you’re able to take a lower loan to value ratio then you may be able to negotiate a better interest rate, which will be valuable as interest rates on these mortgages tend to be higher. You may also find higher arrangement fees – sometimes as high as 2%.

        Lenders normally prefer to offer charities repayment mortgages, although interest only charity mortgages will be available from some lenders. Others may be prepared to do a short interest only period at the start of the mortgage. Typical terms are 10-15 years, but could be anything from 5-25 years.

        Calculate your mortgage payments

        You can use our mortgage calculator below to work out what your repayments could look like on a charity mortgage.

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        Commercial Mortgage Calculator

        This calculator can tell you how much your charity mortgage will cost you each month and overall. Enter the amount you’re borrowing, the term length and interest rate, and our calculator will do the rest.


        Enter the amount you're borrowing
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        Between £3.5% and 6% is an average figure for commercial but the rate you get may vary
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        25 years is average, but most lenders offer longer and shorter terms
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        Monthly Repayments:

        Total amount paid at end of term:

        Get started with an expert broker to find out how much they could help you save on your mortgage repayments.

        How a broker can help

        Section 10 of the Charity Commission’s guidance document ‘CC33 Acquiring Land’ states that: ‘If trustees are buying land with the aid of a loan, it is their duty to secure the best borrowing terms reasonably obtainable by comparing interest rates and other terms between various lenders.’

        The commercial mortgage market for charities is complex, and it’s unlikely that trustees will have the time, knowledge or experience to meet this requirement without expert help. A broker who specialises in charity mortgages will be invaluable here.

        The brokers we work with not only have experience of the market as a whole, but they’ll have existing relationships with individual lenders and be able to act as a negotiator for the charity, helping secure the best possible rates and terms.

        If you get in touch we will arrange for an expert with experience in accessing mortgages for charities to contact you straight away.

        Which lenders offer commercial mortgages to charities?

        Your broker will explore both mainstream and niche lenders specialising in mortgages for charities.

        It’s difficult to predict the exact terms you’re likely to be offered, as charity mortgages are looked at on a bespoke basis, but here are a couple of examples of specialist charitable lenders:

        • Ecology Building Society offers mortgages to charities supporting the environment or local communities. They can loan up to 80% of the total value and rates at the time of writing are 4.15% – 6.15%. They have a 0.5% non-refundable fee on application and another 0.5% on the acceptance of a formal offer.
        • Kingdom Bank specialises in lending to Christian organisations and can offer four different types of charity mortgage for staff housing, social housing, premises or property to be developed for social enterprise.

        Rates and terms will vary depending on your circumstances and eligibility, but your broker will help you explore all your options thoroughly to make sure you get the best deal for your charity.

        Get matched with a specialist charity mortgage broker

        We work with mortgage brokers who have experience in securing commercial mortgages for charities and who will be able not only to get you the best deal but also ensure you comply with the charity regulation requirements at every stage of the mortgage application process.

        When you get in touch we’ll quickly assess your circumstances and match you with a broker with the expertise and contacts that you need as a charity. They’ll have access to the whole of the charity mortgage market and so can provide you with the assistance you need and ensure you find the very best lender for your project.

        Give us a call on 0808 189 0463 or make an enquiry and we’ll arrange a free, no-obligation chat with a mortgage specialising in these mortgages.

        Get Started with a Broker

        Maximise your chance of approval with specialist advice from an expert in Charity Mortgages.

        FAQs

        Yes. The difference will be how the property is registered with HM Land Registry. If a charity is also a company or a charitable incorporated organisation (CIO) then the title to the land can be registered in the name of the charity itself.

        If not, an individual or group of individuals has to be registered to hold the land on the charity’s behalf. This is normally the charity’s trustees, but can be an Official Custodian if you don’t want the time and costs associated with re-registering if your trustees change.

        If you’re not sure that a mortgage is right for your charity, or are worried about meeting eligibility criteria, a secured loan is an option for large amounts for things like building renovations or conversions.

        A secured loan has fewer eligibility requirements and can be quicker and cheaper to obtain. CAF Bank for example offers secured loans for charities from £150,000 to £5 million, (£9 million for social housing projects).

        Yes but, just like buying property as a charity, you’ll need to check that your governing documents allow it and be certain that it’s in the charity’s best interests.

        You’ll need written advice and a valuation from a qualified surveyor, and do everything you can to get the best possible price.

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        Pete Mugleston

        Mortgage Expert, MD

        About the author

        Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

        Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.