Know the limitations of credit unions

Credit unions are slowly earning their chunk of the mortgage market, but brokers warn investors and homebuyers about the potential pitfalls of not knowing the limitations and carefully reading the fine print.

“When it comes to porting, a mortgage credit union has one big disadvantage: If you have to move out of province you will not be able to port your mortgage and will have to pay a penalty to break the mortgage,” one broker wrote on CREW's sister site, MortgageBrokerNews.ca.

“Also, [with] some [credit unions] you have to live a certain distance from the nearest branch. If there is no branch near your new home, you will not be able to port your mortgage.”

Credit unions currently account for six per cent of mortgages funded in Canada, according to CAAMP's most recent Annual State of the Mortgage Market in Canada report.

And while they may be growing in popularity, brokers have mentioned the potential shortfalls of the mortgages on offer from certain companies, including refinancing and porting limitations.

However, as one reader points out, these limitations aren’t ubiquitous across the channel and it’s all about doing your due diligence before closing the deal.

“Some credit unions do operate in more than one province," a broker wrote on MortgageBrokerNews.ca. "Credit unions also have much more flexibility than a bank or monoline does, and offer commonsense in a banking industry that has lost that.

“I have worked for banks, credit unions and as a broker; credit unions are my choice over monolines or banks any day.”