If you’ve been turned down by a bank, you’re not out of options. Canada has a robust alternative lending market that exists specifically for borrowers who don’t fit the traditional mold. Here’s everything you need to know about alternative mortgage lenders — who they are, what they cost, and how to use them strategically.
Who needs an alternative lender?
Alternative lenders serve Canadians who are creditworthy but non-conforming — they can handle a mortgage, but they don’t check every box on the A-lender checklist.
| Borrower Profile | Why Banks Say No | Alternative Lender Solution |
|---|---|---|
| Self-employed (1–2 years) | Insufficient T1 income; write-offs reduce taxable income | Stated income program based on bank statements or BFS |
| Credit score 500–670 | Below bank minimum of 680 | Accept lower scores with rate premium |
| Recent consumer proposal | Must be discharged 2+ years for banks | Accept 1 year post-discharge (some immediately after) |
| Recent bankruptcy | Must be discharged 2–7 years for banks | Accept 1–2 years post-discharge |
| High debt ratios | GDS >39% or TDS >44% | Allow GDS to 50% and TDS to 55%+ |
| New to Canada (<2 years) | Limited credit history | Accept alternative credit proof (international credit, rent receipts) |
| Non-standard income | Commission-based, contract, gig economy | Flexible income calculation methods |
| Non-standard property | Rural, unique construction, >4 units | Broader property approval criteria |
| Large mortgage ($1M+) | Exceeds bank risk appetite | Some alt-lenders specialize in high-value |
The alternative lending landscape
B-lender options
| Lender | Specialty | Access |
|---|---|---|
| Equitable Bank (EQ Bank) | Broad A and B programs; strong self-employed | Broker only |
| Home Trust | Self-employed, newcomers, alternative docs | Broker only |
| ICICI Bank Canada | South Asian diaspora, newcomers, non-residents | Direct and broker |
| Bridgewater Bank | Near-prime, Manulife-affiliated | Broker only |
| B2B Bank | Broker-only alt-A programs | Broker only |
| Haventree Bank | Self-employed, bruised credit, non-standard | Broker only |
| Wealth One Bank | Newcomers, Chinese community | Broker only |
| VersaBank | Digital-only, innovative programs | Broker only |
Private lending options (Tier below B-lenders)
| Option | How It Works | Typical Terms |
|---|---|---|
| Private lending companies | Organized firms with multiple investors | 7%–12%, 12-month terms, structured |
| MICs (Mortgage Investment Corps) | Pooled investor funds, regulated | 6%–12%, various terms |
| Individual private lenders | Single investors funding single mortgages | 8%–15%+, negotiable terms |
What alternative mortgages cost
Rate comparison
| Lender Tier | Typical 1-Year Rate | Typical 2-Year Rate | Typical 5-Year Rate |
|---|---|---|---|
| A-lender | Not common (1-yr) | 4.50%–5.00% | 4.09%–4.50% |
| B-lender | 5.50%–7.00% | 5.50%–7.00% | 5.50%–7.50% |
| MIC | 6.00%–10.00% | N/A (usually 1-yr) | N/A |
| Private | 7.00%–15%+ | N/A (usually 1-yr) | N/A |
Fee comparison
| Fee Type | A-Lender | B-Lender | Private |
|---|---|---|---|
| Lender fee | None | 0.50%–1.50% | 2.00%–5.00% |
| Broker fee to borrower | None | 0.50%–1.00% | 1.00%–3.00% |
| Appraisal | $300–$500 | $300–$500 | $300–$500 |
| Legal fees | $1,000–$2,000 | $1,000–$2,500 | $1,500–$3,000 |
Total cost example: $400,000 mortgage
| Cost Component | A-Lender | B-Lender | Private |
|---|---|---|---|
| Interest rate | 4.30% | 6.50% | 10.00% |
| Annual interest cost | ~$17,000 | ~$25,600 | ~$39,200 |
| Lender fee | $0 | ~$4,000 (1%) | ~$12,000 (3%) |
| Broker fee | $0 | ~$2,000 (0.5%) | ~$4,000 (1%) |
| Total first-year cost | ~$17,000 | ~$31,600 | ~$55,200 |
| Cost premium vs A-lender | — | +$14,600 | +$38,200 |
Qualification criteria comparison
| Criteria | A-Lender | B-Lender | Private |
|---|---|---|---|
| Minimum credit score | 680+ | 500–650 | No minimum |
| Income verification | Full documentation | Stated income available | Not required |
| GDS maximum | 39% | 50%+ | Not applicable |
| TDS maximum | 44% | 55%+ | Not applicable |
| Stress test | Required | Modified (some exempt) | Not required |
| Maximum LTV | 95% (insured) / 80% (uninsured) | 80%–85% | 65%–75% |
| Property requirements | Standard residential | Flexible | Equity-focused |
| Bankruptcy history | 2–7 years post-discharge | 1–2 years | Immediately |
| Consumer proposal | 2+ years post-discharge | 1 year (some less) | Immediately |
The exit strategy: getting back to A-lender rates
Alternative lending should be temporary. Here’s how to use it as a bridge:
Year 1–2: During your alternative mortgage term
| Action | Why It Helps |
|---|---|
| Make every payment on time | Rebuilds your credit score by 50–100+ points |
| Pay down other debts | Reduces TDS ratio toward A-lender limits |
| Build income documentation | 2 years of T1 returns strengthens self-employed applications |
| Avoid new credit applications | Each hard inquiry temporarily lowers your score |
| Save for a larger down payment | Higher equity = lower LTV = better rates at refinance |
At renewal: the refinance conversation
| Exit Path | Timeline |
|---|---|
| B-lender to A-lender at renewal | 1–3 years |
| Private to B-lender at renewal | 6–12 months |
| Private to A-lender | 2–3 years (via B-lender stepping stone) |
Credit score improvement targets
| Starting Score | 12-Month Target | 24-Month Target | A-Lender Ready? |
|---|---|---|---|
| 500 | 580–620 | 640–680 | Marginal — may need 30 months |
| 550 | 620–660 | 680–720 | Yes (at 24 months) |
| 600 | 660–700 | 700–740 | Yes (at 12–18 months) |
| 650 | 700–730 | 730–760 | Yes (at 12 months) |
Red flags when dealing with alternative lenders
| Red Flag | What It Means |
|---|---|
| “Guaranteed approval” | No legitimate lender guarantees approval — they may be predatory |
| Fees not disclosed upfront | All fees must be disclosed before you sign; hidden fees are a violation |
| Pressure to sign immediately | You should always have time to review and get independent advice |
| No broker involvement | Private lenders should be accessed through a licensed broker for your protection |
| Rate seems too good for your profile | There may be hidden fees or unfavourable terms |
| Open-ended or unclear terms | Ensure your mortgage has a clear term, rate, and repayment structure |
How to find alternative lending through a broker
- Tell your broker everything — credit issues, income challenges, debts. Brokers need full transparency to find the right lender
- Ask about the exit strategy — a good broker will explain not just how to get the mortgage, but how to get out of it
- Compare at least 2–3 B-lender options — rates and fees vary significantly
- Understand the penalty structure — some B-lenders have restrictive penalties that make early refinancing expensive
- Get a written cost breakdown — rate, lender fee, broker fee, legal costs, and total first-year cost