Whether you’re a first-time homebuyer or a seasoned real estate investor, understanding the fine print of your mortgage can be trying at times. Which is why in this article we’re going to outline the difference between getting a mortgage with a bank, a trust company and a credit union to help you better understand your options when choosing a mortgage lender.
When the bank becomes your mortgage lender
When you’re searching for the perfect mortgage with the right rate to purchase your new home, many people turn to the banks, not knowing that there are more options available to them at the time. Don’t get me wrong, having a mortgage at your bank can simplify the process for you but it might also really limit your options later on down the road when you need to renew, sell your home or refinance. Another thing to keep in mind is that the bank usually has set rates and set penalties that might have you paying higher fees if you need to break your mortgage or if you decide to transfer your mortgage to another lender at some point. At the end of the day, a bank is convenient but it’s still a business and they will work to build as much revenue as possible, selling you their financial products and services.
When a trust company becomes your mortgage lender
When the bank turns you down for your mortgage and you’re looking for an alternate option, your mortgage broker might recommend you working with a trust company. But what is a trust company and how is it different than the bank? A trust company is a corporation that takes care of the administration of trusts and estates as a trustee. Traditionally a trust company is owned by large banks, that have a private client department, but at times, they are privately owned as well. Because a trust company is run differently than a bank they have more flexibility when it comes to what they can do to assist in funding a mortgage for someone with a difficult financial situation – For example if they are a small business owner or have had credit problems in the past. Along with the benefit of possibly obtaining your mortgage loan through an alternative source like a trust company you may pay higher fees in return for the higher risk that the lender is willing to take on and the extra legwork they might have to put in to get you approved to begin with. Like a bank, a trust company is just that… A company in business to make money, and offer their clients professional service and in-depth knowledge specific to your financial needs.
When a credit union becomes your mortgage lender
More and more people are beginning to realize and understand what a credit union is and how they operate; but did you know that unlike a bank a credit union is non-profit and member-owned? This means that because they are not taking a piece of the pie to line their pockets, there are many benefits of working with them. Usually, you will see lower fees and interest rates because they pass on the savings to their members. The way a credit union does this is similar to a company that allows their employees to buy shares in the company. Which in turn also makes those employees invested in the good of their own company being a part of something bigger, reaping benefits as a community of like minded people. As the members of the credit union are more invested, they’re also more likely to be there to answer your questions and to help you long term, whereas at a bank, sometimes the turnover can be a little high, and you end up talking to a different person about your account each time you visit. Lastly because they are run by the people who they lend to, they’re more likely to fund mortgages to those with less than stellar credit. One of the main benefits of working with a credit union beyond the lower interest rates and fees is that they have customized programs in place to assist people wanting to acquire funding based on their individual circumstance. Whether your issue is poor credit, low income, or you need to borrow extra funds to cover your closing costs, the credit union has other options, that aren’t available at the bank.
Now for the million dollar question… Which mortgage lender is right for you? Well, that really depends. As you can see there are many options when it comes to obtaining your mortgage whether for a first-time home buyer or an income property investor, which is why it’s best to review all of your individual’s needs and options with your mortgage broker. It won’t take long, and if you would like to give me a call at 705-315-0516 I’m happy to set up a time that’s convenient for you to do so while also answering any further questions you might have along the way.