Difference between bank mortgage and credit union home loan?

jill_valentine

I'm now permanent WFH so I'm thinking of buying an extremely cheap one room flat and moving into it to save for a few years, paying it off, and then trading up.

I've been warned by my mortgage broker that the loan value I'm likely to look for would be a major complication - a one room flat will usually require a lower LTV, but the loan value would be so low (60k loan to a 20k+ deposit) that banks may not be bothered servicing it.

My credit union has said they may be able to offer me a home loan package, but only after speaking to them did I cop they seemed very careful to use that specific terminology. The interest would likely be higher but the loan is such a short term it may be worth doing anyway if no other options are available.

So my question is, what are the practical differences between a "mortgage" and a "home loan" in this case? Would I be subject to different conditions and protections with one vs the other?

As far as I know, a home loan and a mortgage are the same thing. A home improvement loan is a separate type of facility, but that would be on a property you already own.

A mortgage will always have the property as security on the loan - when they were talking about the home loan, did they mention any unusual security arrangements? Perhaps under a certain loan value they can forgo security and apply a higher interest rate?

phormium

Credit Unions do home loans more often as a secured loan rather than an actual mortgage, they still take the security of the deeds but it's just a different legal set up. There is no real difference to you other than you pay a higher interest rate, from their side it's a more straightforward loan than an actual mortgage on the property which may not be within their product capabilities.

jill_valentine

Thanks folks.

So my understanding then is that functionally, from my point of view it would feel the same apart from the interest, and function the same for the purpose of transferring title etc through solicitors, it's just underpinned by a different (but established) legal mechanism from the lender's POV. Is that about right?

Would I be right in thinking a homeloan might be a bit simpler in terms of drawdown etc too?

True or False, they didn't mention any unusual security arrangements, no.

The J Stands for Jay

A mortgage is a legal charge over a property, usually made in association with a home loan from a bank. The word 'mortgage' has come to mean 'homeloan' in the vernacular.

jill_valentine

https://www.boards.ie/discussion/comment/117888247#Comment_117888247

Yes, but the Credit Union seem to treat the two terms as distinct, so my question was really about the technical distinctions.

From my point of view there don't seem to be many, practically speaking, although the legalities of who technically owns the property until the last payment may be different? And the interest rate a bit higher.

The J Stands for Jay

https://www.boards.ie/discussion/comment/117888730#Comment_117888730

The are two distinct terms. Banks giving 'mortgages' secire the loan by way of a legal charge on the property. I don't know what the credit union do, but perhaps they keep the deeds without having a mortgage put on the property. As that is riskier, they charge a higher rate to compensate.

Q&A

They seem to call it a mortgage here:

https://www.creditunion.ie/what-we-offer/loans/mortgages/

It's more than likely marketing, why call of a mortgage and have people notice how much more expensive it is than the competition.

Regardless of name you would be covered by the consumer protection codes of the central bank.