Do you need a B Lender Mortgage in Canada?

In the world of mortgage lending, not all lenders are created equal. While most people are familiar with traditional A lenders such as banks like TD & Scotiabank, Monolines such as First National, RFA Bank & Radius Financial, and credit unions like First West, Envision and Coast Capital Savings, there’s another category of lenders known as B lenders that play a crucial role in the Canadian mortgage market.

What is a B Lender?

So, what exactly are B lenders? Well, B lenders, also referred to as alternative, Alt-A or non-traditional lenders, cater to borrowers who may not meet the strict criteria set by A lenders. This could include individuals with lower credit scores, non-traditional sources of income (self employed folks who have lots of write offs) or those need to pay down some debts and can’t pull out enough equity on the A side of lending. Essentially, alt lenders provide an alternative lending option for individuals who may not qualify for a mortgage traditionally.

When do I need a B Lender?

One of the key advantages of alternative lenders is their flexibility. They are more willing to work with borrowers who have unique situations. But, as with any financial arrangement, there are trade-offs. B lenders typically charge higher interest rates (1-2%) and fees (1%) compared to A lenders, reflecting the increased risk they take on by lending to borrowers who may not meet traditional lending criteria. Additionally, borrowers may be required to provide a larger down payment to secure a mortgage through a B lender.

Alternative lenders can be a lifeline for individuals who are unable to secure financing through traditional means, but really want to buy a home or refinance for better cash flow. For example, self-employed individuals or those with non-standard income sources may find it challenging to meet the stringent requirements of A lenders due to lower net income, or lower declared income, making B lenders the best option for them to access the financing they need.

Pros & Cons of B Lending:

Pros:

• They have more lenient qualification requirements compared to traditional banks, making it easier for individuals with non-conforming sources of income or less-than-perfect credit scores to secure a mortgage.
• They may offer lower interest rates compared to some big banks, providing potential cost savings.
• They can provide more flexible mortgage terms and repayment options, allowing borrowers to customize their mortgage to better suit their needs.
• They may be more willing to consider unique properties or situations that traditional banks might not approve.

Cons:

• They mortgages typically come with higher costs, including higher interest rates and mortgage closing costs. It’s important to carefully consider the overall cost of borrowing before choosing a B lender.
• They may have stricter repayment terms with longer amortization periods, which could result in more interest over the term and life of the mortgage.
• They may have limited options for mortgage products and may not offer the same range of features and benefits as traditional banks, such a HELOC’s – most B lenders do not offer lines of credit.
• They may have stricter penalties for early mortgage repayment or refinancing. Some even have bona fide sales clauses which mean you can’t refinance your mortgage at all during the term – the only way you can break the term is with a sale.’

So, who are these magical B lenders?

I have a large handful of B lenders, and Alt-A lenders that I work with here in BC, to name a few:

• Haventree
• Wealth One
• ICICI
• NPX
• RFA Alt
• Equitable Alt
• First National Excalibur
• Bridgewater
• Home Trust

These are some of the fabulous lenders I work with on the alt side – so if you have a unique situation, reach out and we’ll help you achieve your goals