Considering a Credit Union for a mortgage?
Credit unions have been around for a long time in BC, and while they’re not the largest segment of lenders, they can still be a strong consideration when you’re getting a mortgage.
They’re provincially regulated: They’re not generally restricted by the federal government mortgage stress test rules (which the banks and large lenders are held). This means you can often qualify for a larger mortgage through a credit union than a bank. This can help considerably if you’re buying a house with a basement suite etc, as credit unions can usually qualify you for a larger mortgage than a bank, due to different debt service rules (calculating how much you can afford based on income).
They can also help bridge the gap between banks and private lenders by providing mortgage products for unique properties, large acreages, ALR properties etc, that a bank might not be able to lend.
Smaller lending area: Generally, credit unions are restricted to lending only in a geographic area close to their branch. This means you might not be able to port your mortgage to your new home if you move. This is an important consideration, as life situations can change dramatically. Not porting means that you may have to pay a costly penalty if you sell your home.
Collateral charges. All credit unions generally register their mortgages as collateral charges. The largest caution towards this, is that all other debt you have with the credit union (car loans, lines of credit, credit cards etc), can be considered as secured on your home, and they can require it to be paid off if you sell your house. It can also hinder your ability to get 2ndmortgages or lines of credit products with other institutions down the road.
Banking: Generally, you have to maintain bank accounts at the credit union and your mortgage payment must come out of an account at the credit union. This is a possible deterrent to some borrowers.
Rates: Due to how they securitize their mortgages, credit unions generally don’t have rates as low as the larger banks and other financial institutions.
A mortgage broker can provide unbiased advice and evaluate what the best product options and interest rates would apply to your borrowing situation. Whether that’s a bank, credit union or other major financial institution. And their service is free.
Doug Neufeld, BBA, AMP
Senior Mortgage Planner
Dominion Lending Centres – Mortgage Negotiators