A monoline company is a business that specializes in one specific area. In the case of mortgages, they’re called monoline lenders, and they offer only mortgages.
Unlike banks and credit unions, which offer a host of other financial products like credit cards, banks accounts, GICs, and more, a monoline lender only offers mortgages. This might not seem like a big deal, but allow me to explain why monoline lenders are a great option for mortgage shoppers, and can save you thousands of dollars.
1. Lower rates
Monoline lenders don’t have the overhead costs that a bank does. They don’t have a storefront, multiple different departments, or thousands of employees. Don’t confuse a lack of a storefront with a lack of customer service, though. Monoline lenders have strong online and telephone options, so you’re always able to speak with someone or check your mortgage’s status at a time that’s convenient for you.
This lower overhead translates into savings for you, in the form of lower interest rates.
2. Lower pre-payment penalties
A pre-payment penalty happens when you break your mortgage before the mortgage term has ended, and are a feature of any closed mortgage. Monoline lenders typically have pre-payment penalties that are thousands of dollars less than a bank’s penalties.
3. No cross-selling
There’s nothing more annoying than shopping for only one product and having to sit through sales pitches for a bunch of other things you don’t care about. Because monoline lenders have no other services to offer, they can’t waste your time by pestering you with extras you don’t want.
4. Flexible in approvals
Banks have strict rules they adhere to when deciding whether or not to approve your mortgage application, based on your credit score, income, and other factors. If you don’t make the cut, for reasons like being self-employed or being a few points below the target credit score, you won’t be approved. Monoline lenders are willing to meet customers halfway and work with their credit and income.
5. Backed by banks and regulated by the government
It may surprise you to learn that even though monoline lenders are in competition with banks, many actually receive their funding from banks. This provides them financial security, because if the business goes under, your mortgage is safe.
Monoline lenders are also required to follow the same mortgage regulations as banks are. As a client, you’re offered the same protections that bank clients are.
6. Mortgages are standard charge, not collateral charge
A “standard charge” mortgage allows you to transfer your mortgage between lenders at the end of your term for a better deal, unless you have a 2nd mortgage or a secured line of credit on the property. A “collateral charge” mortgage prevents you from transferring your mortgage away from the financial institution that loaned you the mortgage.
If you need a specialized product, you’d go to a specialized store. A mortgage is an extremely complicated and specialized financial product, and getting a mortgage broker that has years of experience in the industry can save you thousands of dollars over the lifetime of your mortgage.