What Is a B Lender Mortgage in Canada?
A B lender mortgage is a home loan from an alternative lender that says yes to borrowers a bank turns down, in exchange for a higher rate and extra fees. Think of it as a stepping stone, not a permanent home for your mortgage.
Banks and other federally regulated lenders follow strict underwriting rules. One of them is the minimum qualifying rate, which makes them test you at a rate well above the one you will actually pay. OSFI says it obliges federally regulated lenders to apply this test, and you can see how it plays out in our guide to the mortgage stress test. B lenders, usually called alternative lenders, are generally not required to stress test their clients. That gives them room to approve a file that looks unusual on paper.
Who ends up there? People whose income or credit does not fit a bank's template. A buyer with a bruised credit history, a newcomer with no Canadian credit file, or someone whose income is hard to document may land with a B lender. Business owners are a common case, although plenty of self-employed buyers still qualify at a bank.
The trade is cost. Expect a rate a point or two above what a bank would offer, a lender fee that is often around 1 percent of the loan, and sometimes a larger down payment, with 20 percent not unusual. Terms run short, commonly one to three years, so a renewal arrives much sooner than it would on a five-year bank mortgage.
That short term is the whole idea. The usual plan is to repair your credit or build a longer income record, then move to a bank at renewal.
In Ontario, mortgage brokerages and agents are licensed by the Financial Services Regulatory Authority of Ontario, which notes that a licensed mortgage agent or broker can help you get a mortgage from all lenders, including alternative and private ones. Our explainer on what a mortgage broker does in Ontario covers how that works. The Financial Consumer Agency of Canada also reminds buyers that the provinces regulate mortgage brokers, so you can confirm a broker is licensed before handing over documents.
Related reading: How Do Newcomers to Canada Qualify for a Mortgage?, What Is a Mortgage Renewal and Your Options in Ontario? and What Are GDS and TDS Ratios in a Canadian Mortgage?.
