Monoline Lenders vs Big Banks: What’s the Difference?

If you've only ever thought about getting your mortgage from a major bank, you might be missing out on better rates. Monoline lenders—institutions that specialize exclusively in mortgages—often offer advantages worth considering.

What Is a Monoline Lender?

Monoline lenders are financial institutions that specialize exclusively in mortgages. They don't offer:

• Chequing or savings accounts
• Credit cards
• Investment products
• Other banking services

Examples in Canada:

• First National
• MCAP
• Merix Financial
• RMG Mortgages
• Paradigm Quest

Why Monolines Often Have Better Rates

Lower overhead:
Without branches, marketing, and full banking operations, costs are lower.

Competition focus:
Their entire business is mortgages, so they compete aggressively on rates.

Broker channel:
They work primarily through brokers, saving on direct sales costs.

Rate difference:
Often 0.10% - 0.30% lower than Big Six banks for identical products.

Big Bank Advantages

Banks aren't without merit:

Brand recognition:
Familiar names provide comfort for some borrowers.

Full-service relationship:
Single institution for all financial needs.

Branch access:
Face-to-face service for those who prefer it.

Loyalty programs:
Sometimes combined banking and mortgage discounts.

Comparing Terms and Conditions

Beyond rate, consider these factors:

Prepayment privileges:

• Monolines: Often 20% lump sum + 20% payment increase
• Banks: Varies widely, sometimes more restrictive

Portability:

• Both offer portability, but terms differ
• Check time limits and conditions

Penalty calculations:

• Banks often use posted rates for IRD (higher penalties)
• Monolines often use discounted rates (lower penalties)
• This can mean thousands of dollars difference. See our early renewal guide.

B-Lenders: The Middle Ground

Between monolines and banks, there's another category:

B-lenders serve borrowers who don't quite fit A-lender criteria:

• Credit challenges (but not severe)
• Self-employment income
• Slightly higher debt ratios

Examples: Equitable Bank, Home Trust, ICICI Bank Canada

Rates are higher than monolines but lower than private lenders.

Credit Unions

Don't forget credit unions:

Advantages:

• Member-owned (may share profits)
• Sometimes flexible on stress test
• Local decision-making
• Competitive rates

Considerations:

• Limited geographic reach
• Smaller selection of products
• May have membership requirements

How Brokers Access All Lenders

This is why working with a mortgage broker matters:

• We submit to 50+ lenders simultaneously
• Compare rates and terms across all categories
• Match your situation to the best lender type
• Handle all paperwork and negotiations

Direct bank applications only show you one option—theirs.

Which Lender Type When?

Choose a monoline when:

• Rate is your primary concern
• You're comfortable without branch access
• Your file is straightforward

Choose a bank when:

• You value full-service banking
• You have complex banking relationships
• You prefer branch access for mortgage questions

Choose a B-lender when:

• You have credit challenges
• Self-employed with non-traditional income proof
• Higher debt ratios

FAQ

Q: Is my money safe with a monoline lender?
A: Yes. Monoline lenders are federally regulated and your mortgage is registered against your property just like with any bank.

Q: Can I pay my mortgage at a bank branch if I use a monoline?
A: Payments are typically made via automatic withdrawal or online bill payment through your regular bank.

Q: Will a monoline lender sell my mortgage?
A: Possibly. Mortgages are often sold between lenders, but this doesn't affect your terms or rate.

Q: Can I switch from a bank to a monoline at renewal?
A: Absolutely. Renewal is the perfect time to shop around. No penalties apply.

Q: Do monolines offer the same products as banks?
A: Most offer fixed and variable rates, various terms, and standard prepayment options.

What's Next

The best mortgage isn't always from the biggest lender. Understanding your options helps you negotiate better terms at renewal and save thousands over your mortgage life.