What is a Monoline Lender?
Whether buying your first home or investing in a commercial property, you may require financing. There are many different options for obtaining financing. One option is what is known as a Monoline Lender.
People are often unfamiliar with the term Monoline Lender. Instead of Monoline Lenders marketing directly to consumers such as traditional, better known Banks do, Monoline Lenders provide their services to Mortgage Brokers: In turn, the Mortgage Brokers act as an intermediate party to bring together a consumer (who needs money to buy the property) and the lender (willing to loan money).
Understanding the meaning of Monoline Lender requires breaking the term into its parts. Mono is Greek in origin and means ‘one’. Lender is a bank or other lending institution. In the context of obtaining a mortgage for a home purchase, a Monoline Lender is a lending institution that focuses on lending services specifically providing financing to purchase property. There are many different Monoline Lenders some of the largest and more frequent Monoline Lenders are First National Financial LP and MCAP. Monoline lenders generally only deal with loans and mortgages on real property: they do not typically offer other common banking services such as chequing accounts or car loans.
It is useful to distinguish Monoline Lenders from other lenders who may have a presence in your community, whether that be Spruce Grove, Stony Plain, or Drayton Valley:
- Firstly, you may contrast a Monoline Lender with a Bank which instead provides a wide array of financial services. In Drayton Valley for example, there are four of the five large banks of Canada: Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), Bank of Nova Scotia (Scotiabank), and Bank of Montreal (BMO). Each of these banks provide other financial services in addition to financing for purchasing a property, and they are all federally approved and regulated according to the Bank Act. For these reasons, Monoline Lenders are sometimes also called “non-Bank lenders”.
- Secondly, you may contrast a Monoline Lender with other traditional lenders which are more similar to banks by having physical offices in the Drayton Valley community, which includes ATB Financial (formerly known as Alberta Treasury Branch) and Servus Credit Union. Unlike these traditional lenders, a Monoline Lender typically does not have a physical office in the community, though the Mortgage Brokers they work with typically do have a physical office in the Community.
- Lastly, you may also contrast a Monoline Lender with a private lender. A private lender is an unregulated lender such as the seller, family member, or a member of the community with the means to facilitate a loan.
Regardless of the type of lender, there are various protections in place for consumers obtaining a loan and mortgage including disclosure of financing terms, and requirements to disclose a high ratio mortgage. Also, while each lender is different generally when receiving financing to purchase a property, a mortgage will almost always be registered on title to the property as security for the loan.
Why might I use a Monoline lender?
These are a few reasons why someone may use a Monoline Lender:
- A Monoline Lender may be more willing to approve financing. For example, someone with self-employment may not qualify for financing from a traditional lender.
- A Monoline Lender may offer financing on better terms. For example, a lower fixed interest rate, a lower payout penalty, or better prepayment terms.
- A Monoline Lender may offer to lend on different terms and conditions. For example, a parent buying a home for a child.
Essentially a Monoline Lender focuses on offering mortgages to finance the purchase of a property and can at times provide additional flexibility and/or better terms for a buyer or borrower.
How can a lawyer assist with using a Monoline Lender?
In Alberta, most lenders (including Monoline Lenders) require a lawyer be selected to act for both the lender and buyer to ensure proper documents are prepared and registered. Generally, when purchasing a property and obtaining financing, the buyer contacts the lawyer to begin preparing documentation after the financing condition is waived.
There are many other ways a Real Estate Lawyer with Main Streeet Law LLP can assist you with your real estate transaction, including reviewing a contract, financial commitment letter, or a Real Property Report. Time can be of the essence in a real estate transaction, and the Real Estate Lawyers at Main Street Law LLP are always pleased to assist in any way possible for the ON TIMETM closing of your transaction.
Please be advised that this article was prepared by Aaron LaForest, Real Estate Lawyer with Main Street Law LLP in Spruce Grove in May of 2023, is intended as a general overview and general information on a legal subject as the law exists at the time of writing and is not intended to be legal advice. Often the specific facts of your legal matter may change or impact the applicability of this information. For legal advice related specifically to the facts of your concern, please consult with any of the Real Estate Law Lawyers at Main Street Law LLP.