The first credit union approved by provincial regulators in over a decade is the first one to focus on the Jewish community—especially its growing need for accessible mortgages.
Lighthouse Credit Union will provide many of the same services as a traditional bank, but its priority will be to help first-time buyers in Toronto’s competitive and pricey housing market, said Harley Gold, chairman of the credit union board and partner and managing director at Peakhill Capital.
The credit union will open sometime in April or May, and will be online at first. A physical branch is expected to open in about a year.
Home prices are an especially serious concern in Toronto’s Orthodox community, where families need to live walking distance from a synagogue. Several observant friends of Gold’s have moved to Lakewood, N.J., where a house costs considerably less by comparison.
“If you’re very wealthy, there’s places you can live in Toronto, but if you’re not, there’s a lot of challenges,” Gold said in an interview with The CJN. “It’s not going to solve every problem with housing, but it will help people stay here and get them into housing.”
The average cost of home in Lakewood is US$469,000, according to online realty company Zillow.com. But in Toronto, the average cost of a detached home was $2 million, according to the Toronto Regional Real Estate Board.
Credit unions, a concept better known in Western Canada than in Ontario, are non-profit institutions. (One of the first credit unions in the country was established in Saskatchewan to help Jews buy farm land in the Prairies.)
Unlike banks, which are overseen by federal regulations, credit unions are a provincial responsibility and have more leeway in approving loans.
They can offer mortgages for 80 to 85 percent of the house’s value, compared to 75 percent offered by the banks, at similar rates. Credit unions also have broader criteria for who can be a guarantor of the loan.
Savings come from the fact that credit unions have fewer branches and much lower marketing costs than the banks. A brick-and-mortar branch of Lighthouse won’t open for about a year, and it will be located in the Bathurst Street and Lawrence Avenue area. Plans are for a second branch to eventually open in Thornhill.
Lighthouse expects to donate between 10 and 20 percent of its profits to local charities, Gold said.
The credit union will also offer lines of credit to communal institutions such as synagogues and day schools, which have found it more difficult to obtain credit at banks.
A feasibility study conducted by an independent consultant, found that just over half (54 percent) of respondents believed it was important for their bank to understand “Jewish-specific needs,” which included automated donations to charities, payment plans for day school tuition, and lower exchange rates for Israeli currency.
About 80 percent of respondents practiced ma’aser, donating one-tenth of their income to charity.
The feasibility study set a goal of about 20,000 members. Gold expects the credit union will eventually have 10,000 to 15,000 members. The average deposit at a credit union is around $40,00, but Gold expects accounts at Lighthouse will be larger. Deposits are insured by the Deposit Insurance Corporation of Ontario up to $250,000.
The project is funded by $15 million in initial equity, with investors contributing not more than 5 percent each.
Eventually the credit union will also provide programs on financial literacy, Gold said, noting some in the more Orthodox community do not have RRSPs or RESPs.
While the new credit union will probably attract the more religious community, it is open to everyone in the Toronto area. Board members come from the Orthodox and liberal sectors of the Jewish community, as well as non-Jews.
