Monoline Lenders in Canada
What’s the Difference Between a Bank and Monoline Lender?
What You Should Know
- Monoline lenders are lenders who only offer one line of lending.
- Monoline lenders do not offer multiple products such as bank accounts, GICs, insurance and credit cards.
- Monoline lenders often offer better rates and more flexible prepayment options than banks.
- They do not have a storefront and typically offer their mortgage products through mortgage brokers.
Canadians can pick from several lender options to get a mortgage for buying a home in Canada. While banks have remained the most popular choice with borrowers, the market share of alternative lenders, such as credit unions, B-lenders, private lenders and monoline lenders, has been rising steadily over the past few years. This is evident from CMHC’s Residential Mortgage Industry Data, according to which chartered banks accounted for 70.38% of loans originated in 2020, but that number fell to 65.68% in 2021, 61.93% in 2022 and 59.52% in 2023 (as of November 2023).
Monoline lenders are into only one line of business, in our case, mortgages, and are experts in the particular niche. Listed below are some of the top monoline mortgage lenders in Canada.
List of Monoline Lenders in Canada
| Name | Markets Served | Types of Mortgages | 5-Year Fixed Rate* | 5-Year Variable Rate* |
|---|---|---|---|---|
| First National Financial LP | Across Canada | Residential, Commercial, Construction, Land | 5.79% (Conventional) | Prime + 0.05% for the entire term (Conventional) |
| MCAP | Across Canada | Residential, Commercial, Construction | N/A | N/A |
| CMLS Financial | Across Canada | Residential, Commercial, Construction | 6.74% (Insured) | N/A |
| RFA | All provinces (Except Quebec) | Residential, Commercial, Construction | 5.69% (Insured) | 6.45% (Insured) |
| MERIX Financial | Across Canada | Residential | 5.69% (Insured rate from Lendwise) | 6.45% (Insured rate from Lendwise) |
| nesto | Across Canada | Residential | 5.34% (Insured) | 5.95% (Insured) |
| Pine | AB, BC, ON | Residential | 5.34% (Insured) | 6.05% (Insured) |
| QuestMortgage | All provinces (Except Quebec) | Residential | 5.49% (Insured) | 6.20% (Insured) |
| CanWise Financial | AB, BC, MB, NT, ON, QC, SK, YT | Residential | 5.34% (Insured) | 6.05% (Insured) |
| THINK Financial | Across Canada | Residential | 5.54% (Insured) | 6.15% (Insured) |
| CMI Financial Group | Across Canada | Residential | N/A | N/A |
| Antrim Investments | AB, BC, ON | Residential, Commercial, Construction | 10.95% (Terms 1-2 years, Max LTV of 75%) | N/A |
| MCAN Financial Group | AB, BC, ON | Residential, Commercial, Construction | 5.59% (Conventional) | Prime - 1% for the entire term (Conventional) |
| Marathon Mortgage Corporation | All provinces (Except Quebec) | Residential | 5.64% (Insured) | Up to prime - 0.90% (Insured) |
| Atrium Mortgage Investment Corporation | AB, BC, ON | Residential, Commercial, Construction Financing, Land and Development Financing | 9.49% (Max LTV of 80%, 1%-2% Lender Fee) | N/A |
| Timbercreek Financial | Major Urban Centres in Canada | Commercial Real Estate | N/A | N/A |
*As of November 29, 2023
What are Monoline Lenders?
Lenders who are into a single (mono) type of lending business are known as monoline lenders. Unlike banks that offer an array of services, such as chequing accounts, credit cards, GICs, and different types of loans, monoline lenders are solely into the business of lending. Monoline lenders do not take deposits or sell any other type of products as they want to stay strictly focused on mortgage lending and maintain their competitiveness in the market. For the same reason, their team is generally composed of highly experienced individuals in the mortgage lending industry.
Benefits: Monoline mortgage lenders typically don’t have storefronts or branches and offer their mortgage products directly through mortgage brokers. This generally translates into low overhead costs, and the savings are often passed along to the borrowers through lower mortgage rates. Specializing in only one type of financial service, monoline lenders are often able to offer superior service to their customers compared to banks.
Regulations and Risks: Similar to banks, monoline lenders are also highly regulated and are required to be licensed. In fact, some monoline lenders are also funded by banks. Monoline lenders are also required to follow lending and disclosure guidelines similar to those of banks. Thus, the level of risk involved in getting a mortgage through a monoline lender is the same as that in getting a mortgage through a bank. If a monoline lender decides to shut shop, their mortgages are transferred to another financial institution.
Capital and Funding: Monoline lenders can be publicly traded or privately held mortgage corporations. Some monoline lenders, such as First National, raise capital by selling their shares publicly and paying dividends to the investors. Another main way monoline lenders operate is through mortgage investment corporations (MICs), such as MCAN Financial Group. MICs pool money from individual investors and invest it in a portfolio of mortgages.
Many MICs are private lenders that provide private mortgages for 1-2 year terms and require a maximum LTV (loan-to-value) of 75% or 80%. Such MICs help fill gaps in the lending industry by extending mortgages to borrowers who do not qualify under traditional lending criteria; however, their interest rates are usually much higher than typical market rates.
Monoline Lenders vs. Banks
While monoline lenders are heavily regulated just like banks, offering the utmost security to borrowers, the two have some key differences.
| Monoline Lenders | Banks |
|---|---|
| Offer only one kind of lending solution and won’t try to sell you other products | Offer many types of products other than loans, such as chequing accounts, credit cards, GICs, etc. |
| Usually don’t have storefronts. | Usually have storefronts. |
| Often accommodate borrowers who don’t meet traditional lending requirements, such as borrowers with bruised credit and self-employed borrowers. | Usually follow strict lending criteria, making loans inaccessible for some borrowers. |
| Usually have greater prepayment flexibility and lower penalty for paying off mortgage early. | Borrowers usually pay heavy penalties for paying off their mortgage early. |
| Typically registered as a standard charge on the property’s title instead of a collateral charge. | Can register mortgages as a collateral charge or a standard charge on the property’s title. |
Advantages and Disadvantages of Getting a Mortgage from a Monoline Lender
Advantages
- Lower rates: Most monoline lenders don’t have storefronts which helps them lower their overheads. As a result, they are able to pass along their savings to borrowers through low mortgage rates.
- Personalized service: Since monoline lenders are much smaller than banks and focus on only mortgage lending, they are often able to offer greater customization and personalized service to their customers.
- Faster processing: Monoline lenders often have a short turnaround time and can be an attractive option for those looking to close their mortgage quickly.
- Greater prepayment flexibility: Most monoline lenders offer greater prepayment flexibility than traditional banks, which means borrowers can potentially pay off their mortgage faster.
- Lower fees and penalties: Monoline lenders generally have low fees and penalties, such as discharge fees, prepayment penalties, etc.
- Better chances of approval: Monoline lenders are usually more accommodating when it comes to self-employed borrowers and borrowers with weak credit, thus improving their chances of approval. However, such borrowers may be charged a higher interest rate.
- Standard Charge: As the mortgage is registered as a standard charge, borrowers can switch to a different lender at the end of a term without incurring any legal fees, provided there is no second mortgage or line of credit on the title.
Disadvantages
- Difficult to access in person: Monoline lenders do not have storefronts, so they cannot be accessed in person and are unsuitable for those who prefer in-person service.
- Single type of service offered: Monoline lenders offer only one type of service and thus are unsuitable for those looking to deal with only one financial institution for all their financial needs.
Monoline Lenders in Canada
First National Financial LP is one of Canada’s largest non-bank mortgage lenders that offers residential and commercial mortgage solutions exclusively through mortgage brokers. First National is a publicly traded company that has been listed on the TSX since 2006 under the symbol FN.
One of Canada’s largest independent montage finance companies, MCAP has assets worth $150 billion under management. The company originates, trades, securitizes and services mortgages on behalf of institutional investors throughout Canada. The company has three main focuses — residential mortgages, commercial lending and construction financing. MCAP’s residential mortgage division is known as RMG Mortgages and offers its mortgage products through the mortgage broker channel.
MERIX Financial offers different kinds of mortgage products through its three core brands — MERIX, Lendwise, and NPX. The company also has a brokerage arm licensed in Alberta, British Columbia, Manitoba and Ontario. According to the lender’s website, they have funded over $29 billion in mortgages since inception.
CMLS Financial is an independently-owned mortgage service company that is into commercial lending, residential mortgages and institutional services. According to the company’s LinkedIn page, it has a portfolio under administration of over $38 billion. CMLS mortgages come with features such as the Home System Warranty Program, Skip-A-Payment, and prepayment privileges, allowing annual lump-sum payments (20% of the original mortgage balance) and increasing regular payments (by 20% at any time).
RFA (Realty Financial Advisors) is a real estate investment firm that entered the residential lending market in 2018. RFA Mortgage Corporation (prime lending) and the RFA Bank of Canada (alternative mortgage lending) operate the residential mortgage lending business. RFA offers its mortgages through the broker channel in all provinces except Quebec. RFA also provides GICs through investment advisors and deposit dealers.
nesto is a digital mortgage finance company that started off as a digital brokerage and has now evolved into a full-stack lender. The company is now originating billions of dollars in annual mortgage volume. nesto has been developing innovative mortgage solutions, such as the 150-day rate hold. nesto became a certified B Corporation in 2022.
Pine is a digital lending platform that offers a completely digital mortgage process for residential mortgages. Pine offers both fixed and variable-rate mortgages through its platform. Being a digital-only lender, Pine can save on overhead costs and offer some of the lowest rates in Canada.
QuestMortgage is an online-only lending platform that is a part of the Questrade Financial Group. The entire mortgage process is completed digitally. QuestMortgage offers both fixed and variable-rate mortgages, and there are both open and closed mortgage options. The lender also offers special programs for newcomers to Canada and non-permanent residents.
CanWise Financial started as a brokerage that became a CMHC-approved lender in 2020. The brokerage arm of CanWise was renamed Ratehub.ca in 2022. The lender offers its mortgage products exclusively through Ratehub and has funded over $11 billion in mortgages.
THINK Financial is the in-house lender of the Canadian brokerage True North Mortgage that offers residential mortgages to borrowers with good credit. The lender offers a unique lending product called ‘Rate Relief’ that offers a low mortgage interest rate for 6 months or 1 year, after which borrowers can either renew their mortgage with THINK Financial or pay them a 1% non-renewal fee if they choose to renew with a different lender. The lender currently works with a limited number of brokers apart from True North Mortgage.
CMI Financial Group started as a mortgage brokerage in 2005, entered the lending market in 2008, and launched its MIC fund in 2015. The lender allows investors to invest in one of the mortgage portfolios or make single mortgage investments. According to the lender’s website, it has placed over $1 billion in private mortgages since 2015, with a default rate of less than 1%.
MCAN Financial Group is an MIC that offered its public share for the first time in 1992. The MIC is now traded on the TSX under the ticker MKP. Being a loan company under the Trust and Loan Companies Act, MCAN is also able to raise funds with term deposits that are CDIC insurance eligible. Their primary business is residential lending; however, the company also offers commercial and construction lending.
Antrim Investments is one of the largest MICs in Canada that serves the private lending market, primarily lending to self-employed borrowers and borrowers with a low credit score. Their main focus is first mortgages for single-family residential units. The maximum LTV (loan-to-value) allowed by Antrim Investments is 75%, which means that the borrowers must pay at least 25% of the property’s purchase price as a down payment.
Marathon Mortgage Corporation (MMC) is a privately owned non-bank lender mainly focused on prime borrowers. The lender offers its mortgage products through the broker channel. MMC mortgages are usually portable and assumable. The lender also offers to pay legal fees, up to $300 appraisal fees and up to $3,000 for penalties and discharge fees to borrowers switching to them from another lender.
Atrium MIC is one of the largest MICs in Canada that is publicly traded on the TSX under the ticker AI. The MIC majorly invests in commercial real estate and development in Ontario and Western Canada. They specialize in mortgages for self-employed borrowers, borrowers who are new to Canada and investors.
Timbercreek Financial is a non-bank lender that provides financing solutions in Canada, the United States and Ireland. The company is traded on the TSX under the ticker TF and focuses on commercial real estate investing, including multi-residential units, offices and retail buildings.