Mortgage lending in Canada is the domain of the major banks and a few other well-established players. But there are alternatives out there, namely monoline lenders who focus exclusively on mortgages. This article will look at what makes monoline lenders different from traditional banks, how they work, and why you might want to consider them if your mortgage needs to take you away from the big names.

What Is a Monoline Lender

Monoline lenders are financial institutions that offer only mortgages and do not provide other services such as bank accounts or chequing. There’s a vast range of monoline lenders in Canada. Monoline lenders generally charge lower penalties for early repayment than the Big Five Canadian Banks (Toronto Dominion Bank, Royal Bank of Canada, Scotia Bank, CIBC and Bank of Montreal). Mono means one; because monoline lenders offer one product: mortgage financing.

Monoline lenders are different from banks because they don’t offer any other financial products like insurance, investments, or loans.

The only place you’re going to hear about that through is through your mortgage broker because that’s the only place you can get access to these monoline lenders is through the mortgage broker program.

Some of our Canadian monoline lenders we deal with are Merix, First National, MCAP, RMG, CMLS, Wealthline. 

Monoline Lenders vs Banks

So what are some of the advantages and disadvantages of each?

Going with the big five banks, you have everything in one account. So if you already have an account with TD, do your mortgage there. Everything’s all in one place.

Monoline lenders generally offer better rates because they do not have physical locations.

They also offer generally better conversion from variable to a fixed rate. Usually, the rates will be a lot better.

Monoline lenders have been around for quite some time now but have seen an increase in popularity in the last few years due to the increasing number of Canadians who want to get into homeownership but can’t afford the traditional bank system.

Like credit unions, monolines operate under federal or provincial charters and, therefore, can grant you access to a nationwide lending network while still keeping costs low through local administration expenses.

Those are some of the advantages disadvantages to a monoline lender. Though they don’t like unique properties, they generally don’t want to touch anything on lease land, cottages, acreages, etc.

Now, which one is better for you? There’s no real cut-and-dry answer to this, and people often get focused on the interest rates. They kind of get the blinders on and worry about interest rates. But, there’s so much more to mortgages than just interest rates; you’ve got portability, flexibility, prepayment, etc.

Monoline Lenders in Canada

Monoline lenders offer competitive rates, easier transfer options, and lower penalty fees. These benefits make them attractive to borrowers who want to avoid the hassle of transferring their loans from one institution to another.

I’ve known many people who have really good interest rates from the five major banks in Canada. But, still, if they had to break their mortgage, their penalty would be costly.

Look into all the details and compare both monoline lenders and the big five banks to see what better option will be for you.

So, if you’re looking for a mortgage, should you go through your bank or a monoline lender? The answer really depends on your personal situation. If you have a good relationship with your bank and they offer competitive rates, it might be worth sticking with them. But if you’re not quite sure what you’re doing or want to explore all of your options, a monoline lender could be the way to go. At the end of the day, it’s important to do your research and make an informed decision that’s right for you. We’ve broken it down so you can make an informed decision. Contact us today for a free consultation – we would be happy to help walk you through the process! Thanks for reading!