Unlike home mortgages that don't mature until they have been repaid in full -- usually over 30 years -- church loans are considered commercial loans and typically mature in five or 10 years with a balance owing, or “balloon” payment due.

If you’ve had a good experience with your lender, you’ll undoubtedly want to see what rate and terms they will offer you to renew your loan. This is generally the easiest and often the least costly thing to do. If you’ve been in compliance with your loan covenants and conditions, and have repaid the loan as agreed, the lender will likely want to retain your business.

But that isn’t always the case.

In recent years, many banks and financial institutions have started dabbling in church lending as their traditional commercial lending opportunities ebbed and flowed with the economic cycle. As such, they might not be committed to the church market and might welcome the opportunity to reduce their exposure to churches and re-concentrate on their primary lending niches or other more profitable opportunities.

This is why it’s important to seek out a lender with a proven track record in church lending -- institutions that have demonstrated that they are committed for the long term, not jumping in and out of church lending depending upon the vagaries of their “normal” business lines.

Ask the lender how many full-time employees are dedicated solely to church lending, and the tenure of those individuals. Refinancing with another lender is often more expensive than staying with the incumbent lender, so it’s wise to do your homework and review all the facts before making your initial lender selection.

In addition to approaching your existing lender, you might also wish to test the current market and call a few qualified church lenders to see what products and rates they might offer. You can find reputable financial institutions that specialize in church lending by reviewing industry publications or asking other churches. Be certain you're comparing apples to apples when shopping for rates. Short-term rates are typically much lower than long-term rates, so ask for the pricing index, as well the lender’s typical “credit spread," so you can make a meaningful comparison. Ask what typical closing costs might be, as the cost of refinancing with another lender might negate any savings on interest rate.

You should review your loan agreement no later than a year before the maturity date. If rates have gone up, and you have a very favorable rate, you might not want to refinance. However, if you are concerned that rates might be significantly higher by the maturity date of your loan, you might see a benefit in giving up your good rate and fixing a longer-term rate now. Interest rates are always in a state of flux, so it's wise to learn your options and be poised to act when the situation is right.

In certain circumstances, it might be beneficial to refinance your loan before it matures. For example, if rates have gone down significantly, and you have no prepayment penalty, it might make sense to incur the costs involved to refinance the note. Or, if you have additional financing needs that your current lender can’t meet, then you might be forced to go to another lender.

Read your loan documents carefully to see if any prepayment penalties or “early termination” changes apply. When you and your lender enter into a loan agreement that provides you with a fixed interest rate, one party or the other (your or the lender) is going to bear the interest rate risk.

Some lenders carry the interest rate risk themselves, and do not charge prepayment penalties. Other lenders mitigate their interest rate risk by charging prepayment penalties. If rates go down and you wish to refinance, a prepayment penalty will help compensate the lender for the interest they will no longer be earning.

Some loans are structured so that the interest rate risk is off loaded to a third party through a derivative contract (called a “swap contract”). Prepayment in whole or in part can result in a gain or a loss to the church. The concept is that the third party is contractually entitled to the interest rate set at documentation, and prepayment will result in them having to re-lend those funds at current rates for the remaining loan term. If rates have gone up, the third party might pay the church a premium for the opportunity to re-lend their money at higher rates. But if rates go down, “early termination” charges can be significant.

The cost of refinancing varies greatly. If you elect to go to another lender, the upfront closing costs are likely to be about the same as for the initial loan. If you stay with your current lender, the process can usually be streamlined and is thus less costly. However, lenders are heavily regulated, and are required to perform certain due diligence on real estate secured loans, within certain prescribed timeframes. As such, refinancing might involve obtaining a fresh appraisal, conducting environmental due diligence and updating title work.

Prepare for refinancing well in advance of your loan’s maturity date, so that you can complete the process smoothly and avoid having the loan become due and payable in full, and thus jeopardize your credit rating. Early preparation might also enable you to take evaluate your options in a changed interest rate environment and minimize your interest rate exposure.

The overriding advice is to be diligent in all things -- especially large debts.

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Dan Mikes is the senior vice president of Bank of the West in Walnut Creek, Calif. For more information, call 800.405.2327 or visit www.bankofthewest.com/churchlending .