Contents
Everyone is familiar with a bank and a credit union however many are not familiar with a monoline lender.
What is a monoline lender and why are they an option to explore when looking for a mortgage?
Mono, meaning one, means that a monoline lender has one line of product to offer, that being mortgages. Banks and credit unions however offer a variety of financial services.
By offering one type of product, this of course does not mean that monoline lenders are any less of a company or more risky. It just means they specialize in one product. Just like Lamborghini is not any less of a vehicle in comparison to Honda or Toyota. They just specialize in one type of vehicle, and do it quite well.
If you do not like being solicited to, fortunately a monoline will not try to cross sell you on their other products like RSPs, credit cards, overdraft protection and so on, as they do not offer these.
Monolines in Canada are very reputable and have been around for decades. A monoline lender sources their money from Canada’s major banks and lend it out at lower rates. With monoline lenders being able to focus solely on mortgages, they have been known to have more options on their mortgages. Plus, more streamlined online service. Plus they typically have lower rates due to having less overhead then banks and credit unions.
All monolines secure their mortgages with back-end mortgage insurance from one of Canada’s three mortgage insurers such as CMHC.
One major difference between a bank and a monoline lender is the penalty structure if ever needing to break your mortgage. With monoline lenders, the penalty to break the mortgage is much lower. This is because banks and monoline lenders calculate their IRD (Interest Rate Differential) differently. Banks use a posted rate which is quite high when calculating the IRD. Monolines use what is called an unpublished rate or discounted rate. Typically, both a bank and monoline lender will allow you to port your mortgage.
Many banks will allow you the prepayment option to pay of 10% to 15% of your mortgage per year without a penalty, where monolines typically will allow 20%.
As mortgage brokers have access to banks, credit unions, monoline lenders and more they will be able to review all these different options for you.
Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.
Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.