# Re morgage V's Cr Un loan



## Cathal (16 Oct 2004)

I need to carry out an extention to my home and I am considering borrowing €40,000 from the Cr Un as opposed to re morgaging, I have money going on a weekly basis to the credit union from my wages direct and would be able to pay it off over 10 years, if I re morgage or change to a new lender I may have to pay solicitors fees, if I just go to the credit union I wont have to do this and the rates dont seem to make that much of a difference or do they? I can also draw down the money easier and they are very helpful


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## Brendan Burgess (16 Oct 2004)

How much have you saved in the Credit Union? 

You should be able to remortgage at 3%  which would cost you €1200 a year from your home loan lender on €40,000 or €900 a year, if you already have saved €10,000.

What rate would the Credit Union lend to you at? Would they let you withdraw the €10,000 and borrow only €30,000. In many cases, they insist that you keep the €10,000 in shares and borrow the full €40,000.

If they do this and they charge 6% on the loan, you will pay €2,400 a year in interest. You will probably get €200 dividend on your €10,000 shares. So the net cost to you of the credit union would be €2,200 a year. 

To me, there is a huge difference between €2,200 a year and €900 a year. It is well worth incurring some legal costs to make this savings.

In summary, you need to find out:
1) What rate will your mortgage provider charge you?
2) What rate will the Credit Union charge you?
3) Will the Credit Union allow you withdraw all your savings like the mortgage provider will? 
4) What will the legal costs be in remortgaging? 

Brendan


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## dubinamerica (18 Oct 2004)

*.*

but isn't there an additional cost in that there's life insurance required by building society ? Also - I think credit unions will give some type of 'rebate' on the interest paid.  the main advantage of the credit union is that you don't have to pay additional insurance and that the debt will die with you and that a multiple of your shares will be available (soem limitations dependent on age).. I'm interested on finding out some more on this as I also have a credit union loan now and have shares and I'm not sure if I should pay this off now. I know that it doesn't make sense to keep paying a loan when the interest rate is high compared to savings but I like having the flexibility of the credit union and the insurance aspect.   Any one any thougts on this ? I've seen a rate of 4.5% for a year long loan and 7.5% for longer loans , available in the credit union. I think loan redemptions are being charged at 4.5% also ..  When factoring in rebate and life insurance could it make sense to move a loan to CU?


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## aoa321 (18 Oct 2004)

*Re: .*

I am a big fan of the Credit Unions - the flexibility and the general attitude of the people involved is a big attraction, I find them to be very "human" and people-oriented institutions.

BUT the Credit Unions are very expensive for large amounts that you cannot clear quickly - Brendan has already done the figures for you - if I were you I would think carefully before taking out such a large loan with the CU when you can get it elsewhere at a much reduced cost.

and remember that you don't have to leave or break your relationship with the Credit Union just because you decide to go with the bank this time


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## cathal (19 Oct 2004)

*cr union loan*

I had forgotten about the insurance aspect and that was also a factor that is putting me off going to the Bank, I think I could get a rate of 4.5% on 40,000 over 10 years, I feel anytime you involve solicitors and banks they are only going to rip you of further in a transaction that can be done smoothly in the credit union, I cant see  the bank being much better when you factor in the reasonable rate, extra insurance on bank loan and the solicitors fees and also the hassle it will involve, however brendan said I could save up tp 900, brendan or anyone else will you look at it again now that you have the intrest rate, i would be borrowing the full 40,000,


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## dubinamerica (19 Oct 2004)

*.*

If you go onto www.unision.ie and go to personal finances (under business) there's a repayment calculator ..Assuming inflation = 0 I got the following figures:
40,000 4.5%   10yrs 414.56p.m.  total interest=9,746.44
40,000 3.25% 10yrs 390.88p.m.   total interest=6,905.01
40,000 3%     10yrs 386.24p.m.   total interest=6,349.17
(checked the first one on a credit union site and it agreed also ) .. There would also be some rebate if the loan was taken out at CU - I think it's around 10/15% of interest charaged, and no insurance, so - I think you should find out what rates you'd get in the mortgage lenders and also with your credit union and find out about life insurance, to be able to make a real comparison.  Anyone else any thoughts on this ? I recently got a top up loan and a second mortgage from a building society because of the amount involved but mainly because it's an investment and we wanted to keep it to interest only . (CU don't give mortgages unfortunately, but do provide mortgage redemption) but in this case it would be redemption so other factors would be of more importance.


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## Slim (19 Oct 2004)

*Re: Borrowing from the Credit Union*



> I've seen a rate of 4.5% for a year long loan and 7.5% for longer loans , available in the credit union



This seems a very low rate for a CU. Credit Unions are not really the place for borrowing large amounts for mortgage purposes. If you go to your mortgage lender you may be able to top up with a minimum of fuss and probably at 3-3.5%.The 4.5% may apply to one year loan, and I would be interested in the terms, but you will pay much more over the longer term. Credit Unions do not insist anymore on keeping a set % of the loan on deposit but you have to clarify at the borrowing application stage what you plan in this regard.  am big into C but would not borrow this kind of money from them/us.

Slim 8)


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