As mortgage brokers, we work with a variety of lenders to find a fit for our clients financial needs. What many people don’t know is that the big banks only provide about 50% of all mortgages in Canada. Naturally you may wonder who makes up the other half, and the answer is monoline lenders.
A monoline lender is a company that focuses on solely mortgages. They do not offer other products such as bank accounts, or RRSP’s, nor do they have expensive branch networks to maintain and staff. They are large companies that are regulated and governed in the exact same manner as all Canadian banks. First National, Home Trust, Street Capital and MCAP, are just a few examples of the billion dollar companies that provide just as many mortgages as most of the big banks.
Advantages of a Monoline Lender
The advantage of dealing with monoline lenders are that their rates are usually very competitive. In addition to ‘standard’ mortgages, some offer mortgages that specialize in different areas such a self-employed clients, new immigrants, or lower than average credit scores. They offer online access to your mortgage, great customer service with knowledgeable staff, and generous prepayment options. You can have them take your mortgage payment from your regular bank account for free as well. Being the best at what they do is how they compete with the big banks.
One of the other most important advantages of a monoline is they tend to have a lower penalties. This can be important if you need to get out of your mortgage before the end of your term. In a recent example, a client was charged $15,500 to break his 5 year mortgage after 3 1/2 years with his bank. If that mortgage was with a monoline the penalty would have been closer to $2,500.
Advantages of a Big Bank Mortgage
We also offer mortgages with several of the big banks and credit unions. Some customers feel comfortable knowing they can go into a branch if they ever need to make changes to their mortgage. Or, they may need other services such as a safe deposit box or a RRSP. A mortgage broker can usually negotiate a lower rate with the bank on your behalf.