Comparing Banks and Credit Unions When Shopping for Mortgages

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Comparing Banks and Credit Unions When Shopping for Mortgages

Banks and credit unions are the two most common sources of funding for mortgages. Although they function quite similarly, there are some key differences, particularly when comparing them in terms of being home loan lenders.

Structure is the main concept that differentiates them. As where a bank is a private, for-profit company, a credit union is a not-for-profit organization run by its members.

Because the credit union is not profit driven, any excess earnings go back to the members in the form of member services, dividends, or better interest rates.

A bank, on the other hand, is profit-driven and its excess profits go to the stockholders.

Since credit union profits generate better rates for its members, its mortgage rates tend to be lower than that of banks.

However, not all credit unions are large enough or have the resources to provide mortgage loans or mortgage refinancing. On the other hand, large banks are equipped to handle these mortgage loan services, but may have higher interest rates.

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