The Non-Bank Lender Landscape: Why Monolines Are the Banks’ Worst Nightmare
Banks Don’t Want You to Read This
Walk into TD, RBC, or Scotiabank and you’ll hear the same story: “We’re your best mortgage option, we can beat whatever rate is out there.”
But there’s an entire ecosystem of monoline lenders. Monoline Lenders are mortgage-only companies that fund hundreds of billions every year and they’ve built their business by beating the banks where it matters most.
What’s a Monoline Lender?
A monoline lender is a mortgage-only company. They’ve figured out what they do well and zero in on that. That means no chequing accounts, no credit cards, no physical branches. Just mortgages (and maybe the occasional Home Equity Line of Credit).
Think names like:
You won’t see them on billboards or during hockey games, and the reason they aren’t is for a good reason…. they don’t need to, since they work exclusively through mortgage brokers.
Proof They’re the Real Deal (MCAP Example)
Take MCAP, one of Canada’s largest monolines:
Over $150 billion in assets under administration (this means they manage their own portfolios and portfolios of other companies - to the tune of $150B+ in mortgages)
More than 1,500 employees nationwide, from coast to coast
Backed by 30+ major investors, including several of the Big 5 banks
Serving over 400,000 Canadian homeowners
Regulated by OSFI and FSRA
So yes, they’re real, they’re regulated, and even the banks are investors in them.
How Monolines Compete (And Often Win)
1. Rates
Banks sometimes get hyper-aggressive on rates, especially when they need deals to close in 30 days. Monolines don’t always undercut them, but they’re competitive and steady. They’re not chasing quarterly sales targets the same way banks might… they price based on the capital markets, which means what their investors are willing to take on returns.
2. Penalties (This Is the Big One)
Here’s where monolines crush the banks, and where all my client chats land when deciding on a lender. Between life plans.
Banks calculate penalties using inflated “posted rates.” Monolines calculate fairly, based on actual discounted rates, which means rates that you could actually get today.
Example:
$500,000 mortgage, 5-year fixed, broken at year 3 (note: this is statistically when roughly 60% of borrowers break their mortgage)
Bank IRD penalty: ~$18,000
Monoline IRD penalty: ~$4,000
That’s a $14,000 difference on the same mortgage balance, simply because of the formula.
3. Service
Banks run hot and cold. They’ll offer a killer rate, then take a week to issue a commitment on a deal that needs to close in 30 days. That’s a nightmare if you’ve got a financing condition but also want the best rates.
Monolines? Generally consistent. Brokers deal directly with underwriters, and commitments are turned around quickly. In my experience, if there are service disruptions, monolines are generally more transparent about their service levels. If you need certainty, you go monoline with the clear expectations on their turnaround time to make your deadline to lift conditions.
I will say though, when banks are in regularly scheduled programming (meaning no crazy promos), they generally conduct themselves like monolines and are pretty quick at responding too. It just seems counterintuitive with banks to offer big promotions, overwhelm themselves, and not be able to handle the incoming volume - which can be frustrating for brokers whose names in the industry are markedly important, just to let down their clients with a long response.
4. Flexibility
Monolines often give:
Better prepayment privileges
Smoother portability
Less red tape when life changes mid-term
Real-World Scenarios
Investor Example: A client buying a duplex had a 5-day financing condition. The bank’s underwriting queue was backlogged. A monoline committed in 48 hours. Deal saved.
Family Example: A couple needed to relocate for work two years into a 5-year mortgage. Bank penalty: $22,000. Monoline penalty: $6,000. That’s $16,000 still in their pocket, or at least not having to be paid to the banks to make up for a hypothetical lost interest on a comparable mortgage rate that no one would feasibly take.
How They’re Funded (The Plumbing)
Here’s why monolines can compete:
Banks fund mortgages with deposits (your chequing and savings accounts).
Monolines fund mortgages through the capital markets - selling pools of mortgages into CMHC-insured mortgage-backed securities. Want to learn more about the mortgage backed securities world? Click here!
That gives them direct access to large-scale investor money. It’s why their pricing is steady and why they don’t need to lure you into a branch.
Renewals: The Hidden Advantage
Banks rely on laziness at renewal. Most people just sign the letter - often at rates 0.5% to 1% higher than they could have negotiated.
Monolines? They know you’re working with a broker, so they stay competitive at renewal. Otherwise, the broker simply moves you to another lender for better rates. They even have entire teams dedicated to do this, and retaining business.
Fun fact, I used to be one of them and was the top performer on the team - so I know all the tricks in the books.
Why Haven’t You Heard of Them?
It’s pretty simple…
They don’t advertise to the public.
Brokers bring them the business on a silver platter that have already been vetted by them.
The banks won’t mention them, because if you compare, the banks lose on penalties and service.
Who They’re For
First-time buyers who need financing certainty.
Homeowners who don’t want a $20,000 surprise penalty.
Investors juggling multiple properties on tight timelines.
Anyone who wants real choice instead of a take-it-or-leave-it bank offer.
Bottom Line
The Big 5 want you to believe they’re your only choice. But monoline lenders quietly fund hundreds of billions of Canadian mortgages every year. They’re safe, regulated, and often the smarter move, with fair penalties, faster commitments, and more flexible terms.
At VeloMortgage, we work with every major monoline lender in Canada. If you’re serious about protecting your wallet and getting the service you deserve, book a call today.
Jeff Dinsmore
Mortgage Broker
FSRA # 10315
TMG - The Mortgage Group
Gotta know more about these big players?
See their websites here: