If your mortgage is up for a renewal and you are speaking to your mortgage broker, chances are the term “Monoline Lender” has come up at least one or twice.
This term is pretty vague and ambiguous to non-mortgage brokers and outside industry professionals.
Monoline lenders focus just on mortgages. What this means is that they are non-deposit taking lenders like a normal bank and secure their mortgages on the property.
They have much lower overhead and costs, as they are usually online with few offices. They deal only with mortgage brokers on the clients’ behalf.
Monoline lenders bulk insure their mortgages through mortgage insurance providers therefore are more flexible with their lending. Since the lending guidelines have become stricter in the past few years, Monoline lenders offer a great alternative for many individuals.
With a large number of them available, completion among them and other lenders usually means a more competitive rate and a better product for the consumer. Monoline lenders also specialize in different areas. Some will accept application with a lower credit score, some have a greater flexibility in prepayment, and some offer better programs for self employed people reporting little income. They follow the same rules followed by all Canadian Banks and are just as secure.
Other advantages of monoline lenders are that they do not register a collateral charge on the property meaning that you can transfer your mortgage at renewal to a new lender of your choice. Monloine lenders also tend to have a lower IRD calculation should you need to get out of your mortgage prior to the end of your term.
With any lender it is important to read the fine print. Just because you are going with a monoline lender doesn’t mean that your penalty to get out will be less. Some monoline lenders have actually have heftier penalties for some of their most attractive mortgage rates.
Like always, make sure you are well informed and know what you are signing. Ask the right questions and work with a trusted mortgage professional.