We work with all sorts of lenders—banks, credit unions, trust companies and monoline lenders—to get you the mortgage that best fits your unique needs.
Wait. What’s a monoline lender, you ask? If you’re not familiar with monoline lenders, you’re not alone. Most people aren’t either.
That’s why we wrote this post. Here are 5 things you should know about monoline lenders.
1. What is a monoline lender?
Sometimes known as non-bank lenders, monoline lenders work exclusively through mortgage brokers. Because they don’t typically market themselves to consumers, their names may seem unfamiliar.
Monoline lenders deal only in mortgages. They don’t offer other financial services or types of credit. They don’t even maintain physical branches, working almost entirely online or by phone.
2. Why should I use a monoline lender?
In short, monoline lenders save you money.
First, monoline lenders have low overhead and a streamlined business model. This save them on business costs, and they pass this onto consumers through rates that are often lower than what the big banks can offer.
That’s why mortgage brokers like them, and why you should, too.
Second, another way monoline lenders save you money is through their penalty structure on fixed-rate mortgages. The formula they use to calculate exit penalties differs from how big banks do it. So, if you end up breaking your mortgage, the penalty on a monoline mortgage can be thousands of dollars less than that if you had gone with a bank.
Most homeowners never plan to break their mortgage, but unexpected life events happen. According to this Globe and Mail article, about 70% of borrowers must change their 5-year fixed rate mortgages before maturity because rates dropped, or they moved to a bigger house, or their financial situation changed.
3. Have I heard of any monoline lenders?
Probably not. That’s because, as we said above, they market themselves to mortgage brokers, rather than consumers.
You might’ve heard of First National, Canada’s largest monoline lender, or MCAP, the second largest. But you probably haven’t heard of RMG, CMLS, or some of the smaller lenders we work with.
But that doesn’t mean they aren’t reputable. Many have been around for decades, and a bit of internet research will reveal their legitimacy.
4. Are monoline lenders secure?
Yes. Just like the big banks, monoline lenders are strictly regulated. In fact, they’re required to follow the same lending guidelines as major lenders.
They’re not in the business of giving loans to high-risk borrowers. In fact, all monoline lenders secure their mortgages with insurance from one of Canada’s three mortgage insurers.
That low-risk business model means there’s little risk to the borrower if a monoline lender were to cease operation. As when Scotiabank took over ING Direct in 2012, another lender could simply take over the purchased company’s insured mortgages. There would be no impact on borrowers.
5. Is a monoline lender right for me?
Some borrowers prefer working with big banks and trust companies because they’re familiar. That’s understandable.
But if you’re interested in finding the best mortgage for your needs, you’ll need to be open to borrowing from a lesser-known lender. This may require a bit of research.
You’ll need to read the fine print on penalty calculations, portability, refinance limitations and more. The strings attached to some monoline mortgages can be onerous, but that’s true with loans from banks, credit unions and trust companies as well.
But you don’t need to do it alone. Our mortgage brokers are here to answer your questions and offer independent advice. They can help you understand how each product’s terms may affect you. Remember, we work for you, not for the lenders
Want to learn more?
The mortgage landscape can be confusing. As independent mortgage brokers, our job is to educate you about the many options offered by the many lenders in Canada. We work with home buyers and major lenders to find our clients perfectly matched mortgage products. Even if they come from monoline lenders.
Ready to get started? Contact us today to meet with one of our brokers.