There are three kinds of mortgage lenders in Canada: A lenders, B lenders and private lenders. Which one fits you depends on your credit, your income and the property. Here is how they compare, with examples from around Niagara.
What is an A lender?
A lenders are the big banks, monoline lenders, trust companies and credit unions. They offer the lowest rates and usually charge no lender fee.
They are a good fit if you have strong credit and steady income that is easy to prove. You must pass the stress test. They offer insured mortgages (less than 20% down) and conventional mortgages (20% or more down).
What is a B lender?
B lenders, also called alternative lenders, include some trust companies and the alternative arms of a few banks. They help people who fall just outside the bank rules, such as:
- Self-employed people whose tax returns show less income than they really earn
- Newer businesses
- People with a thin or bruised credit history, or a recent consumer proposal
- Properties the banks will not finance
Expect a higher rate, a term of one to three years and usually a lender fee of about 1%. B lenders do not offer insured mortgages, so you need at least 20% down or equity.
A B mortgage is meant to be temporary. After a year or two of on-time payments, many people move back to an A lender at renewal and get a better rate.
What is a private lender?
Private lenders include mortgage investment corporations (MICs) and individual investors. They are the most flexible and the most expensive. They focus on the property and your plan to pay them back more than on your income.
People use them for short-term needs, such as bridge financing, a construction project or a quick closing. A Niagara builder who needs money fast for a short project might use a private lender.
What if a bank says no?
A no from a bank is not a no from every lender. B and private lenders exist for files that do not fit the bank’s boxes. Talk to a broker before you give up.
Quick comparison
- A lenders: best rates, for strong credit and steady, provable income
- B lenders: more flexible on credit and income, higher rate and a fee
- Private lenders: short-term and fast, the highest cost
Renewing soon? See our mortgage renewal guide. New to the country? Read our new to Canada mortgage guide.
Helpful sources: CMHC, Financial Consumer Agency of Canada, FSRA.
Talk to us
We work with A, B and private lenders, so we can show you the best fit for your file. Book a call or phone 289-723-2126.
Common questions
What is the difference between an A lender and a B lender?
A lenders, such as banks and credit unions, offer the lowest rates but have strict rules on credit and income. B lenders are more flexible but charge a higher rate and usually a fee of about 1%.
Do B lenders charge fees?
Most do. A lender fee of about 1% of the mortgage is common, and some files also have a broker fee. You get all fees in writing before you sign.
Can I move from a B lender back to a bank?
Often yes. After a year or two of on-time payments and better credit, many people switch to an A lender at renewal.