Do Credit Unions Have Better Mortgage Rates Than Banks?

Credit unions have been gaining popularity in recent years, and for good reason. They often offer more personalized service and a sense of community that's hard to find at larger banks.

One of the biggest benefits of credit unions is their competitive mortgage rates. In fact, credit unions tend to offer rates that are 0.25-0.5% lower than those offered by banks, according to data from the Credit Union National Association.

This can add up to significant savings over the life of a mortgage. For example, on a $200,000 mortgage, a 0.5% lower rate could save you around $1,500 per year.

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Credit unions offer lower rates on loans, which can add up to significant savings in the long run. According to the National Credit Union Association, as of December 2021, a 30-year, fixed-rate mortgage with a credit union has an average rate of 3.18%.

This is because credit unions are not-for-profit financial institutions owned by their members, allowing them to return profits to and invest in members. Joining a credit union is easier than you might think, with thousands of options available across the United States.

To get the best rates and fees, look for a credit union that is federally insured, like OCCU, which provides insurance coverage on deposits up to $250,000.

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Credit unions offer lower rates, which can save you money in the long run. As of December 2021, a 30-year, fixed-rate mortgage with a credit union has an average rate of 3.18%, compared to 3.20% from a bank.

Not having shareholders means credit unions can return profits to their members, allowing them to offer more attractive interest rates and lower fees. This is a big advantage over banks that prioritize their investors.

A lower interest rate of even a few tenths of a point can save you tens of thousands of dollars over the life of your mortgage. For example, a $350,000 mortgage with a 30-year fixed-rate loan saved $20,157 over 30 years with a credit union mortgage compared to a bank mortgage.

You'll also experience savings with lower closing costs and fees during the mortgage process. This can add up to even more savings over time.

The difference in interest rates may seem small, but it's worth considering. Paying $28 every month for 30 years adds up to $10,560, which could be invested in your retirement.

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Credit unions are less likely to sell your loan because they prioritize preserving the relationship between the institution and the member.

Typically, lenders sell mortgages to open more lines of credit and make a profit. However, credit unions don't usually sell their mortgages, unlike banks.

This means you're less likely to receive a notice that your loan has been sold to another institution, and you won't have to worry about making payments to the wrong place.

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Credit unions have consistently offered lower interest rates on various mortgage products compared to retail banks. Over the past decade, credit unions have provided better rates than banks for 15-year fixed-rate mortgages in 23 out of the last 40 quarters.

In the second quarter of 2021, the national average 15-year fixed-rate mortgage interest rate provided by credit unions was 2.59%, while banks offered an average rate of 2.66%. This translates to a significant difference in monthly payments.

Here's a comparison of average 15-year fixed-rate mortgage interest rates for credit unions and banks over the past year:

This difference in interest rates can add up to big savings over the lifetime of a mortgage.

Credit unions offer lower rates on mortgage loans, which can save you money in the long run. To estimate how much you can save, use a mortgage calculator.

In the second quarter of 2021, the national average 15-year fixed-rate mortgage interest rate provided by credit unions was 2.59%, while banks offered an average rate of 2.66%. This means credit unions provided lower interest rates than banks for 15-year fixed-rate mortgages in all four quarters of 2020-21.

Over the past decade, credit unions have been more likely to provide better rates than banks for 15-year fixed-rate mortgages, doing so in 23 out of the last 40 quarters.

Here's a comparison of average 15-year fixed-rate mortgage interest rates provided by credit unions and banks in 2020-21:

A lower interest rate of even a few tenths of a point can save you tens of thousands of dollars over the life of your mortgage. For example, a $350,000 mortgage with a 30-year fixed-rate loan and a 3.91% interest rate would have a monthly payment of $1,653, while a 4.05% interest rate would increase the monthly payment to $1,681.

This may not seem like a lot, but paying $28 more every month for 30 years adds up to an extra $20,157. That's money you could be investing in your retirement or putting towards other financial goals.

In fact, a 30-year fixed-rate mortgage with a credit union has an average rate of 3.18%, compared to 3.20% for a bank, as of December 2021. While the difference is small, it's still a savings of $2 per month, or $720 over the life of the loan.

Credit unions have offered better interest rates over the past year in three major mortgage categories: 30-year fixed-rate mortgages, 15-year fixed-rate mortgages, and 5/1-year adjustable-rate mortgages. This is likely due to their not-for-profit status, which allows them to return profits to their members rather than shareholders.

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Choosing a credit union can be a great way to save money on your mortgage. Thousands of credit unions are available in the United States, each with its own membership criteria.

Your eligibility to join a credit union may depend on where you live, work, or went to college. However, most credit unions have expanded their membership criteria, making it easier to qualify.

To join a credit union, you'll need to check their membership requirements. For example, OCCU requires you to live or work in one of the 67 Oregon and Washington counties they serve.

Before making a decision, make sure to check if the credit union is federally insured. The National Credit Union Administration (NCUA) provides insurance coverage on deposits up to $250,000, just like the Federal Deposit Insurance Corporation (FDIC) does for banks.

Look for a credit union with the lowest rates and fees on mortgage loans. Some credit unions offer low- or no-closing-cost options, which can save you money.

A good credit union should also have robust digital banking tools. This means you can easily manage your account and make payments online or through a mobile app.

Here's a quick checklist to help you choose a credit union:

Credit unions often have membership requirements, which can limit who can take advantage of their mortgage rates.

Some credit unions may have limited branch locations, making it difficult for borrowers to access their services.

Membership requirements can also lead to a sense of exclusivity, which may deter potential borrowers.

Credit unions typically have lower overhead costs compared to banks, but this doesn't always translate to lower mortgage rates.

A credit union's mortgage rates may be affected by its size and financial stability, with larger, more stable credit unions often offering more competitive rates.

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Credit unions often have more flexible underwriting guidelines, allowing for better mortgage rates for borrowers with lower credit scores, such as those with scores between 620 and 680.

In fact, according to the article, credit unions may approve mortgage applications with credit scores as low as 620, whereas banks often require a minimum score of 680.

Credit unions also tend to have lower debt-to-income ratios, allowing for more mortgage options for borrowers with high debt levels.

Borrowers can expect to save around $100 to $200 per month on mortgage payments by choosing a credit union over a bank.

Credit unions typically offer more competitive mortgage rates, with average rates ranging from 3.5% to 4.5% APR.

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Credit unions have been offering better interest rates than retail banks in various mortgage categories. In the past year (2020-21), credit unions provided lower rates than banks for 30-year fixed-rate mortgages in three out of four quarters.

Credit unions have also been more likely to provide better rates for 15-year fixed-rate mortgages, doing so in 23 out of the last 40 quarters. This is a significant advantage for those looking to take out a 15-year mortgage.

The difference in rates may seem small, but it can add up to big savings over the lifetime of a mortgage. For example, a slightly lower rate on a 30-year mortgage can translate into a smaller monthly payment.

Here's a comparison of average 30-year fixed-rate mortgage interest rates for credit unions and retail banks in the second quarter of 2021:

Credit unions have also been offering better rates on home equity line of credit (HELOCs) than retail banks. In the second quarter of 2021, the national average interest rate on a HELOC provided by a credit union was 3.81%, compared to 4.1% for banks.