April 4, 2016
What is a Monoline Lender?
As the largest independent mortgage brokerage in Canada, we partner with “Tier A” lenders which include major banks and Monoline lenders. The lowest rates we advertise are often offered by Monolines, like THINK Financial. This is because they have simple business models with low overhead and focus strictly on residential mortgage clients.
You may wonder if there are any risks with using a Monoline; There really aren’t any. They are in the business of lending money, not taking it, so they are holding onto all the risk. Monolines are also regulated by the government just like the major banks so they must follow similar disclosures and lending guidelines. In fact, many Monolines receive their funding from major banks.
What if a Monoline terminated their business operations? Another financial institution would take over their mortgages. For example, this happened twice in the last four years when Scotiabank acquired Tangerine (formally known as ING Direct) along with FirstLine who is still in the process of transferring their mortgages over to CIBC. All of those mortgages stayed as-is with virtually no impact to the borrower.
There are more benefits to using a Monoline than just a low rate, such as, smaller penalties in the event you have to break your mortgage, pre-payment options that are typically better than the banks and turn around times for approvals that are much faster.
Every client has a unique situation and has different mortgage needs, but all deserve the best rate. It is our duty to assess each circumstance thoroughly to determine which lender best suits them and quite often, it's a Monoline lender that we recommend.
Here are some advantages of monoline lenders:
- They focus on one line of business: mortgages. This means they will not cross-sell you on products like chequing accounts, savings accounts, insurance, investments, credit cards, etc.
- No storefronts which means overhead costs are kept at a minimum which allows them to pass on the savings to clients in the form of lower interest rates
- The mortgage industry is heavily regulated by the government which protects the client as they are required to follow the same lending guidelines as the major banks
- Mortgages are registered on title as a “standard charge” and not “collateral charge” which means you can transfer the mortgage to another lender at the end of the term without incurring legal fees (providing there isn’t a 2nd mortgage and/or secured line of credit on title)
- Some monoline lenders can be flexible with circumstances such as offering mortgages for property investors, people with damaged credit, and self-employed individuals
- Some can close a deal quicker than the major banks – this is crucial for deals with an urgent closing date and needs priority attention
- Rates are often much lower than the major banks which typically result in a lower penalty should the mortgage be discharged prior to the end of the term
- Pre-payment options are typically greater than the banks
- They also offer online access to your mortgage as well as customer service departments to take on telephone inquiries
For more information, please feel free to contact us and one of our mortgage agents will gladly assist you!
Note: Rules and guidelines are subject to change. Please inquire within.