If Canada's five chartered banks were the only institutions allowed to lend money in the form of mortgages in this country, rates would be sky-high, and the selection of mortgage products would be rather slim. Thankfully, we have non-bank lenders to keep the Big Banks on their toes.
While these lenders may not invest the same number of dollars in fancy advertising campaigns, they're nevertheless an excellent option for savvy consumers who are looking for a good mortgage deal.
Because non-bank lenders don't have to support the overhead costs of brick-and-mortar branches, and instead opt to go through the mortgage broker channel, they're able to offer better rates. In addition, because they're seeking to steal market share from the dominating big banks, they're much more likely to offer unique mortgage features - such as better prepayment options, flexible payment frequencies, and unique products such as cash-back mortgages - while at the same time offering a little more flexibility when it comes to clients with lower credit scores, or those that are self-employed or commission-based.
While non-bank lenders aren't considered "banks" in the traditional sense, they're still required to follow all the same regulations and underwriting guidelines as their bank counterparts. They also have access to the same default insurance options as the big banks - whether that's through CMHC, Genworth, or United Guaranty.
Not all non-bank lenders are "sub-prime" (in fact, there are very few of these lenders left in Canada), and while it's true that many of them are foreign-owned, there are many homegrown institutions here as well. Their models have seen success across the globe, and continue to thrive here in Canada.
If you're in the market for a new mortgage or a renewal, I invite you to head into your local bank branch to see what type of deal it can offer you. Then pop by my office and I'll scour the rest of the country's lenders - and likely save you a few percentage points off your mortgage.