Wednesday, 22 July 2015

Don't Call Me "Bank" - The Truth About Credit Unions


I know what you're thinking, that's quite the logo. It's old school, but it gets the point across!

Who The Heck Are These People?

According to Credit Unions of BC, a credit union is a financial institution whose key difference from a traditional bank is the structure of ownership. Credit unions are owned through shares held by the members. In addition to being owned by the members of the institution, they are also governed by a board of directors which is voted on by those same members. In true democratic fashion, each member is given a vote which they can use to choose who they feel will best represent them on the board of directors.

Many people feel that having a system like this allows more accountability, control, and personal influence in the operations of their financial institution. As a result of being locally owned and operated, most credit unions also feel a need to give back to their respective communities and can often be found supporting local events through sponsorships, etc.

Why Choose Them?

As was just mentioned, credit unions are a local business. This allows them to keep their profits in the communities and to reinvest in the areas within which they operate. Another nice side effect of the local member ownership is that credit unions pay dividends to their members when they are profitable. It therefore becomes beneficial for the members to invest in their local branch and to keep them operating at successfully as possible, in order to maximize their potential dividends paid.

When it comes to mortgage lending, credit unions have some unique advantages. Credit unions are provincially regulated in a slightly different manner than the major banks(which are federally regulated), which allows them some flexibility in their loan and mortgage guidelines. There can be flexibility in terms of income, debt servicing, or property types, and it can vary from one credit union to the next.

Often, credit unions offer some of the best solutions when it comes to mortgages for modular/mobile homes, as well as new home construction. They are able to create programs tailored to these types of properties which come with competitive rates and features. This flexibility to adapt is simply not there with some of the other financial institutions.

That Sounds Great, What's The Catch?

There are a few minor drawbacks to placing your mortgage with a credit union, but the two major issues are:

Portability

Credit unions generally have limitations on the area in which they choose to lend and offer services. This can be a drawback if you are forced to move to another area in which your credit union does not operate. This is an important consideration that should be discussed with your mortgage broker before deciding if this is the right option for you.  

Membership

You will most likely be required to open an account in order to have your mortgage with a local credit union. A small member shares account is usually the bare minimum, with many requiring that you also open a chequing or savings account which regularly maintains a balance. Do your research, and find out if this is a requirement and if they offer an account option that suits your needs.

A Viable Alternative

As a licensed mortgage broker, I am proud to offer products from many different credit unions around BC. I keep these options available so that my clients know they have an opportunity for flexibility and creative lending in those situations where it is required.

If you're thinking about building a new home, purchasing a modular or mobile home, or considering any home purchase or investment, book your free appointment today to find out if a credit union mortgage might be a good option for you.

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