A B-lender mortgage is a mortgage from an alternative lender: usually a trust company or a smaller bank that lends to borrowers a major bank turns down, such as people with a bruised credit history, income that is hard to document, or debt ratios above a bank’s limits. These loans are sometimes called subprime or near-prime mortgages. They cost more than a bank mortgage, and most borrowers use one for a term or two before moving back to a standard lender. This guide is part of our guides to mortgages outside the standard bank route.
A-lenders, B-lenders and private lenders
Canadian mortgage lenders fall into three broad tiers. The tiers differ in who regulates them, which borrowers they accept and how much they charge.
| A-lender | B-lender | Private lender | |
|---|---|---|---|
| Who they are | Major banks, most credit unions, monoline lenders | Trust companies and smaller banks that specialise in alternative lending, some credit unions | Individual investors, private lending companies, mortgage investment corporations (MICs) |
| Typical borrower | Good credit, fully documented income, standard property | Credit problems, recent bankruptcy or consumer proposal, hard-to-document income, high debt ratios | Turned down by B-lenders, or needs a fast or short-term loan |
| What decides approval | Credit, income and debt ratios | Credit, income and the equity in the property | Mainly the equity in the property |
| Income proof | Full documentation (T4s, notices of assessment) | Flexible: bank statements, an accountant’s letter | Minimal |
| Mortgage insurance | Available with less than 20% down | Rarely: most B-lender mortgages are uninsured | Not available |
| Federal stress test | Applies at federally regulated lenders | Applies at federally regulated B-lenders | Not bound by it |
| Cost | Lowest rates, usually no lender fee | Higher rate, often a lender fee | Highest rates, plus lender and broker fees |
| Typical term | Commonly 1 to 5 years | 1 to 3 years is common | Often 1 year, frequently interest-only |
Rates for each tier move with the market, so they aren’t listed here: see today’s mortgage rates for the bank benchmark, and expect a B-lender to quote above it.
Who uses a B-lender mortgage
| Situation | Why a bank says no | What a B-lender looks at instead |
|---|---|---|
| Credit score below what banks accept | The score or recent missed payments fall short of the bank’s minimum | The reason for the damage, how recent it is, and the equity |
| Recent bankruptcy or consumer proposal | Banks want a longer clean history after discharge | How long since discharge and the payment record since |
| Self-employed with low reported income | Tax returns show income after write-offs | Business bank statements and an accountant’s letter (see stated-income mortgages) |
| High debt ratios | Housing or total debt costs exceed the bank’s limits | Higher ratio limits, offset by a bigger down payment |
| New to Canada with a thin credit file | Not enough Canadian credit history | Proof of savings, rent history and employment |
| Commission, contract or seasonal income | Income varies from year to year | A longer average or bank deposits |
| Unusual property | Rural, mixed-use or hard-to-value homes | Broader property criteria, sometimes a lower loan-to-value |
Insured mortgages come with fixed debt limits. For an insured mortgage, CMHC caps your housing costs at 39% of gross income (GDS) and your housing costs plus other debt payments at 44% (TDS); lenders set their own limits for uninsured mortgages. Credit is a hurdle for insurance too. For a CMHC-insured purchase, at least one borrower or guarantor needs a credit score of 600 or more; CMHC may use other ways to judge creditworthiness for a borrower with no credit history. That is why most B-lender borrowers put 20% or more down and take a conventional mortgage. The CMHC insurance rules cover the rest of the insurer criteria.
If credit is the main problem, our guide to getting a mortgage with bad credit covers score ranges and the steps to rebuild before or during a B-lender term.
The stress test at a B-lender
The federally regulated trust companies and banks that make up most of the B-lender market apply the federal stress test to the mortgages they approve. Lenders check that you could afford the payments at the greater of your contract rate plus 2% or 5.25%, a floor set by OSFI for uninsured mortgages and by the federal government's mortgage insurance rules (the Minister of Finance's Eligible Mortgage Loan Regulations) for insured ones. Private lenders and MICs are not federally regulated lenders, so the federal rule doesn’t bind them. The stress test guide explains how the qualifying rate works.
What a B-lender mortgage costs
The cost comes from three places:
- A higher interest rate. B-lenders price for risk, so the rate depends on your credit, down payment and documentation. Comparing each quote with current bank rates shows the premium you are paying.
- A lender fee. Many B-lenders charge a one-time fee, set as a percentage of the mortgage and usually taken from the advance. It belongs in the written quote next to the rate.
- Broker and closing costs. Most B-lenders only take applications through mortgage brokers. On some alternative deals the borrower pays the broker a fee; appraisal and legal fees apply as on any mortgage.
A shorter term also means renewal and switching costs come around sooner, and the penalty clause matters more than usual when the plan is to leave at renewal.
The tier below: private lenders
When B-lenders also decline, private lenders and MICs lend mostly on the equity in the property, for short terms and at the highest cost. Our list of private mortgage lenders in Canada profiles the companies and MICs that lend this way, and the MIC guide explains how a MIC funds its loans.
The example below shows why a private mortgage is treated as a short bridge. It uses illustrative figures, not quoted terms.
Example: a one-year private mortgage of $300,000 on a $450,000 home (a loan-to-value of 66.7%), at 10% interest-only, with a 2% lender fee and a 1.5% broker fee:
| Cost item | Amount |
|---|---|
| Interest for the year | $30,000 ($2,500 a month) |
| Lender fee | $6,000 |
| Broker fee | $4,500 |
| Legal fees | $1,500 |
| Appraisal | $400 |
| First-year cost | $42,400 |
When the fees and closing costs come out of the advance, the borrower receives $287,600 of the $300,000 and still owes the full principal when the term ends.
The path back to an A-lender
A B-lender or private mortgage is usually planned as a step, not a destination. A typical progression looks like this, although the timing depends on how quickly the original problem is fixed:
| Stage | Typical timing | What changes |
|---|---|---|
| Private lender | Months 0 to 12 | Finances stabilise; every payment made on time |
| B-lender | Months 12 to 36 | Credit score recovering; income documented on tax returns |
| A-lender | Months 24 to 48 or later | Clean recent history, stable documented income, equity built up |
What moves a borrower up a tier:
| Action | Why it helps |
|---|---|
| Paying every bill and mortgage payment on time | Payment history is what rebuilds a credit score after a setback |
| Keeping credit card balances well below their limits | High utilisation drags a score down |
| Paying down other debts | Brings debt ratios back under bank limits |
| Filing tax returns that show the real income | Banks generally want two years of returns from a self-employed applicant (how banks assess self-employed income) |
| Avoiding new credit applications | Each hard inquiry lowers a score for a while |
| Building equity | A lower loan-to-value widens the choice of lenders at renewal |
Moving to a new lender at renewal usually means a new application, an appraisal and legal costs, and it becomes a refinance if the amount changes too. Breaking a B-lender mortgage before the term ends triggers its prepayment penalty, so the term length and penalty clause are worth comparing as closely as the rate.
Red flags
| Warning sign | What it can mean |
|---|---|
| “Guaranteed approval” | No legitimate lender approves before seeing the file |
| Fees revealed late or only verbally | Lender, broker and legal fees belong in writing before you sign |
| Pressure to sign quickly | Time to read the commitment and get independent legal advice is normal |
| An unlicensed intermediary | Mortgage brokers are licensed by their province, and the provincial regulator lists licensees |
| No clear term or renewal terms | The mortgage should state its term, rate, payment and what happens at maturity |
Missed payments on any mortgage can lead to enforcement, and private lenders in particular may move quickly. Our guide to the foreclosure and power of sale process explains how that works by province.
How to get a B-lender mortgage
Because most B-lenders deal only through brokers, the usual route is a mortgage broker who places alternative mortgages. The broker needs the full picture (credit problems, income, debts) to match you with a lender, and a written breakdown of the rate, lender fee, broker fee and legal costs lets you compare offers on their total cost. Our ranking of the best B-lender mortgages in Canada covers the individual lenders and their criteria, and the overview of types of mortgage lenders places them alongside banks, credit unions and monolines.
Buyers who aren’t Canadian residents face a separate set of lender rules, covered in the guide to non-resident mortgages in Canada. When no lender will approve yet, rent-to-own is another route, with its own risks.
Sources
The figures and rules on this page come from these sources, last checked against them on September 29, 2026. How we check facts.