What is a Monoline Lender you ask?
First national, Street Capital, MCAP, Merix, Canadiana… who are these players in the mortgage world & why should you know about them?
The previously named lenders & many more like them make up a large chunk of mortgage origination in Canada. They are called monoline lenders & today we’re going to take a look at what they are all about.
Without getting into too much detail on securitization & balance sheets, monoline lenders are basically lenders who focus solely on mortgages. They can’t take deposits. They can’t cross sell you the same financial products as a bank or credit union. They just do mortgage lending. The added competition they have brought into the marketplace is one of the reasons mortgage rates & promos are more competitive now than ever, so really, they are a good addition to the market.
So why haven’t you heard of them? Well, really, that’s understandable. They don’t market directly to consumer like the big banks – only the banks have the budget to compete in that realm. They work solely through the broker chain, so it’s totally normal if you’re unfamiliar with their names.
Does that make them a poor option for your mortgage? Not at all. Monolines do billions & billions of dollars of mortgage volume annually. In fact, the top monolines do more volume than most of the big banks so there is nothing to worry about from that perspective. And because monoline lenders focus solely on mortgages, they can be very efficient & can churn out approvals in as little as 4 hours.
The other major advantage of monoline lenders is that they do not have posted rates. This translates to lower penalties on the fixed rate side & better options when converting a variable rate to a fixed.
So what are the downsides of a monoline lender? Well, the biggest difference you will see is that monolines do not have branches like a bank. If physically walking into a branch to make prepayments or inquire about your mortgage is important to you, these would not be the best choice. With that said, most people nowadays prefer to manage their finances online or via phone/email, so this is not typically a deal breaker.
All in all, monoline lenders play an important role in the mortgage market & have been a great solution for millions of Canadians. More options are good options & at the end of the day it all comes down to finding the best product that is the best fit for your needs.
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