Dispelling the CU myths

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Increasingly competitive fixed rates at credit unions have brokers debating what if any limitations come hand in hand, especially around the question of whether those mortgages are effectively closed.

“Credit Union mortgages are not closed mortgages,” one MortgageBrokerNews.ca commenter, Danielle Nielsen of Aldergrove Financial Group, stated yesterday. They can be paid off in the same way as the banks or monolines.”

An Ontario player offered similar analysis.

“I can’t speak for all credit unions but at our credit union, our members can pay down their mortgages faster,” Sheila Bradt of Comtech Credit Union said. “We allow them to pay 30 per cent of their mortgage each year and we also allow them to double up their mortgage payment on each payment.

“I did the math on it once and it is possible to pay off a $300,000 mortgage in 10 years.”

Nevertheless the debate among brokers continues about whether a mortgage can be fully discharged before the term ends with significant penalty.

Another criticism fielded by credit union proponents was the allegation that CUs don’t allow property to be rented out over the course of the mortgage term.

“Homeowners are permitted to use their property as an investment property to rent,” Bradt said. “The five-year rate would probably be the same for a rental investment property, as long as there isn’t a lot of risk involved. We would classify it under our commercial portfolio.”

Of course, every credit union has different rules and is only able to lend in the province in which it operates.

Yesterday, a broker criticized one local credit union in St. John’s Newfoundland for not allowing a client to refinance a mortgage.

“They were looking to refinance to pay off some credit cards and they wouldn’t allow him to do that. He had to wait until the end of the term if he wanted to refinance.”

As long as the rules are carefully parsed, credit unions offer an alternative to big banks or monolines at competitive -- or as is currently the case, better -- rates.

“Our rates are extremely competitive,” Bradt said. “We have a five-year closed at 3.14 per cent.”

  • BC Broker on 2013-08-28 9:57:13 AM

    BC credit unions are hard to work with, they have one set of rates for clients that walk in and a whole different set of rates for broker clients.

    No channel equality what-so-ever.

    Vancity CU and Prospera are the worst in the bunch.

  • Okanagan Broker on 2013-08-28 11:36:59 AM

    okay...this article does nothing to dispel any myths...so I will...In BC a Credit Union mortgage is no different than any other mortgage when it comes to payout penaties, pre-payment priviledges, refinancing etc. Most BC Credit Unions use the creditmaster mortgage product, a blanket charge on the property that allows subsequent advances and readvances using seperate loan notes and no addtional trips to the lawyer/notary...How do I know? I worked at one of the 1st BC CU's to adopt and use this new product when it was introduced years ago...I have no idea what BC Broker means about BC CU's being hard to work with...I use CU's for lots of my deals, great rates, killer service, good flexible product and happy clients. Sure, using a CU instead of a monoline might hurt my renewal numbers, but new referral deals from those happy CU clients are great. Prospera was a fantastic CU to deal with until Nov 2012 when an internal audit shut down many of the great things being done at the branch level...Oh Well, Next CU please...Maybe some CU's have their own weird and restrictive rules...but in general the Creditmaster mortgage product and the CU's I deal with are the same, or better than most banks/monolines I deal with...

  • citizen on 2013-08-29 10:24:01 AM

    I'm confused, how is a CreditMaster mortgage different than a collateral mortgage that brokers have been complaining about. You cannot go second behind a CreditMaster and CreditMasters cannot be transferred.

  • Okangan Broker on 2013-08-29 10:35:33 AM

    You are absolutley correct it is just like a collateral mortgage...but as a broker I can do mutiple advances with the CU lender under that mortgage...AND we have done 2nd's behind them (privately) by getting our CU to "CAP" thier lending under the CM mortgage...but that is rare, we just have a really good relationship with our CU's in this area...In reality the collateral charge is a good product for many clients, but not for a broker always looking to switch clients...really comes down to know your lender, know your client, and work closely with both so we all benefit.

  • .. on 2013-08-29 11:25:35 AM

    ..

  • Ontario Banker on 2013-08-30 10:49:36 AM

    Banks, Mono-lines, trust companies, and now credit unions... is there a lender anywhere in Canada that is safe from attack by mortgage brokers?

    Read through the articles in CMP, the Journal, and other broker news sites and publications. Brokers have at one time or another found something wrong with pretty much every single lender that has ever dealt with brokers. It is always complain complain complain about lenders from broker… It must be comforting for consumers to know that brokers are so perfect and us lenders are so perfectly awful.

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