Who Are B lenders in Canada?

There is a traditional path when buying a house in Canada. Typically, you’d visit your bank and a mortgage broker to qualify for a loan, hopefully at the most competitive rate possible.

For most home buyers, it is a solid plan. However, it’s also important to be aware of the different types of mortgage lenders that might be available to you. In this post, we’ll talk about B lenders, who they are, and when you might want to consider going a different route.

Do you have a specific home buying challenge? The best way to overcome it is with personalized guidance. Book your complimentary Buyer’s Consultation right here.

Alternative Lenders: Canada

Traditional banks are also referred to as “A lenders” or “Prime Lenders.” In any case, they are highly regulated by the federal government, and as a result, they tend to have very strict lending criteria. A mortgage stress test applies, and approvals tend to favour buyers with low risk. An alternative lender is any financing company that doesn’t fall under the umbrella of the federal government.

Those who are self-employed or have less than stellar credit might need to branch out to make their goals of buying a house a reality. Alternative lenders can also be a viable choice for young buyers or newcomers to Canada who haven’t yet had a chance to establish their credit.

Understanding the market and how financing works can help streamline your home-buying process. The posts below might help:

What Are B Lenders?

With all the talk about so many different types of mortgage lenders, it can be confusing to know which is which. So let’s talk about A lenders vs B lenders vs private lenders.

An A lender is one of the major banks, such as Royal Bank, Scotiabank, CIBC, or the Bank of Montreal. These are the most stringently regulated by the federal bank. Typically, they come with the lowest mortgage rates, but approvals can be strict and take a long time.

The terms alternative lenders, private lenders and B lenders tend to all be used interchangeably, but there is a subtle difference in the terminology.

An alternative lender could be any company that isn’t a major bank or federally approved financial institution.
While all lenders must follow Canadian law, private lenders are the least regulated and offer the fewest protections for borrowers.
B lenders fall between traditional banks and private lenders in terms of regulation. They are less stringent than the banks but more structured than private lenders.

Some of the top B lenders in Canada include smaller banks, trust companies, or credit unions. As such, they can offer advantages such as faster approvals and more flexible lending criteria. One possible downside is the potential for higher interest rates.

When to Use a B Lender

Turning to a B lender is an obvious choice if you can’t qualify for a traditional mortgage. However, there are other reasons to consider a smaller provider beyond easier and faster approvals.

They can be an ideal solution if you’re looking for short-term financing or flexible terms. Large banks are unlikely to consider one-year loans, but B lenders will typically have more options.

Smaller companies also tend to feel more personal. Instead of dealing with a faceless entity where you feel like just another number, you can often talk face-to-face with a mortgage expert who is happy to answer your questions. For example, many credit unions are community and member-oriented. If your relationship is strong enough, you can overcome some financial challenges.

Focusing on the Big Picture

B lenders tend to focus on your equity and overall ability to repay your loan rather than approving you solely based on your credit rating. If you have a down payment and steady income, you can typically qualify. They are often the go-to option for self-employed individuals or existing homeowners seeking a second mortgage or bridge financing.

If your credit score is slightly bruised, but not terrible, B lenders can function as a stepping stone for the major lenders. You will likely need more money upfront for your down payment and current B lender mortgage rates are usually slightly higher. However, this could be the difference between being able to buy a home now instead of waiting.

An approval will typically require a home appraisal, which could cost from $500 to $650. In addition, there is usually a lending fee of approximately 1.5% of the borrowed amount.

Are you searching for even more house hunting resources? You’ll find plenty of valuable insight in the posts below:

Best B Lenders in Canada

B lenders tend to be small, and there are so many options that it is difficult to point to any company as the “best.” That said, our team has a of couple institutions that we feel comfortable in recommending.

Home Trust: After opening their doors in 1977, Home Trust has become a leading finance institution in Canada. They specialize in helping those who can’t quite qualify for traditional mortgages, often working with first-time home buyers and self-employed business owners.

Credit Unions: Credit unions tend to be more flexible and offer a more personalized level of service than traditional banks. One example is the Ukrainian Credit Union, which is the largest ethnically-based credit union in Canada. This institution has strong roots in the community and focuses on assisting Ukrainian residents and other new immigrants.

Are you in the planning stages to buy your next home? Our Etobicoke real estate agents are here for anything you need. Reach out today at 647-282-7653 or email contact@sileckythompson.com with any questions or to get started.