Credit Union Mortgage vs. Bank Mortgage

Credit unions are the non-profit foil to for-profit banks and lending institution. Both can give you a home mortgage loan, as well as credit cards, savings accounts and other financial instruments. But each one will provide you financial services a little bit differently. Here are the key differences that you might encounter when shopping for a credit union mortgage vs. bank mortgages.

The Not-For-Profit Model

Credit unions, by nature, are not-for-profit institutions. They don’t typically have ties to Wall Street, they don’t engage in risky trading behavior and they are less likely to practice predatory lending tactics in order to turn a quick buck. As such, many say that credit unions are more attention to their members and are more dutiful in serving their needs. That’s not to say that for-profit banks never have excellent customer service departments, but when you are a member of a credit union, you are literally a part owner in the institution - so your interests will usually be the highest priority.

Members Only

Any creditworthy borrower can walk into a bank and get a mortgage loan. But in order to get a mortgage from a credit union, you’ll have to be a member first. Membership eligibility varies from credit union to credit union, but usually it’s based around occupation, region or professional association. Some large companies have their own credit unions, solely for their employees.

Fewer Choices vs. Lower Rates

Because credit unions are smaller and are less profit driven, they will usually have fewer options in terms of types of mortgages. You can likely get the basic types, such as fixed mortgages and adjustable rate mortgages as well as some commercial mortgages, but you won’t see many of the exotic mortgages that you might find at a big bank. This means that you might not be able to find that perfect niche mortgage loan that will save you the most money over the long run.

But for the vast majority of borrowers, the traditional mortgage loan types are sufficient. And because credit unions are non-profits, they pay less taxes and other fees than commercial banks. These savings are often passed along to you in the form of lower interest rates and closing costs.

Secondary Market

It’s common practice for commercial lenders to turn around and sell your mortgage on the secondary market. Sometimes, this is done immediately after closing. This means that you’ll actually be sending your payments and interfacing with a company other than the one that gave you your loan in the first place, for better or worse.

Credit unions still occasionally sell mortgages on the secondary market, but the practice is less widespread than it is among commercial banks. If you’d rather have your mortgage stay close to home, credit unions may be a good bet.

Conclusion

Overall, the differences between credit union mortgages and bank mortgages are subtle, but they can sometimes have a big impact. It’s a good idea to shop for mortgages from both banks and credit unions and compare and contrast the level of service, fees, and interest rates.