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.”