One of the major benefits of using a mortgage broker every time you need a new mortgage or when you’re looking to renew/refinance an existing one is choice. Mortgage brokers have access to several different types of lenders in addition to traditional banks such as ‘monoline’ lenders.
Although not as well known as banks and credit unions, monolines provide excellent mortgage solutions to meet the needs of a variety of different borrower types, including the self employed.
While banks and credit unions provide an assortment of financial products and services in addition to offering mortgage financing, monolines solely concentrate on mortgages. The term ‘mono’ literally means ‘one’, as in a singular focus.
Monoline lenders have a great reputation and follow the same rules as Canadian banks, so you’re also well protected.
Keeping mortgages competitive
As a mortgage broker, I value monolines in the mortgage space as they offer very competitive pricing and specialized products that help me ensure I find the mortgage product and rate that best matches each client’s needs.
Monolines also help keep the banks competitive. In fact, monoline lenders often source their funds through the big banks – even ones that don’t lend directly through the mortgage brokering channel.
Monolines are frequently able to pass along better deals to borrowers because they don’t face the high overhead costs associated with branch locations.
Additionally, if you must break your mortgage early with a monoline, you’ll likely pay a lot less in penalties than if you have your mortgage placed with a major bank. That’s because banks and monolines calculate penalties differently. Early exit penalties, for instance, are typically calculated using three months’ interest or the interest rate differential (IRD) – whichever is higher.
The IRD is the penalty that can really add up with the banks.
If you’re considering breaking your mortgage early – which the majority of Canadian mortgage holders end up doing on a standard five-year fixed-rate mortgage – I can help you decide if it makes sense or if you should stay with your current term longer. With interest rates near record lows, this is a question I’m asked frequently.
Have questions about monoline lender options or breaking your mortgage early? Answers are just a call or email away.