You’ve been told "no" by your bank. It’s a frustrating and disheartening experience, especially when you know you have a solid income and valuable property. For many Canadians, a denial from a big bank feels like the end of their mortgage journey.

But here’s the reality: it’s just the beginning of exploring the world of "alternative lending." The two main players in this space are B-Lenders and Private Lenders. While they are both solutions for borrowers who don't fit the rigid mold of the big banks, they are very different tools designed for very different situations. Confusing them can lead to a flawed financing strategy.

This guide will provide a clear, authoritative comparison from a mortgage broker's perspective. We'll explain exactly what each type of lender is, who they are for, how their costs and processes differ, and how we help clients in Ontario choose the right path to a successful approval.

The Lending Tiers: A Quick Refresher

To understand B-Lenders and Private Lenders, it helps to see the whole landscape. The Canadian mortgage market is structured in three tiers.

'A' Lenders: This is the top tier. It includes the major banks (RBC, TD, etc.), credit unions, and prime monoline lenders. They have the strictest rules, set by federal guidelines, and offer the lowest interest rates. They are reserved for clients who fit perfectly into their qualification "box" (e.g., excellent credit, easily verifiable T4 income).

'B' Lenders: This is the alternative tier. They cater to good clients who just miss the strict 'A' lender guidelines for one or two reasons.

Private Lenders: This is the most specialized tier. They are asset-based lenders for the most complex or time-sensitive borrowing situations.

Learn more about home equity loans in Ontario

Check your eligibility in under 60 secs.

See How Much I Qualify For

A Deep Dive into B-Lenders

B-Lenders occupy a crucial space in the market, providing fair solutions for thousands of Canadians who are still excellent borrowers.

Who Are They? Regulated Institutions

A common misconception is that B-Lenders are sketchy, back-alley operators. This is completely false. B-Lenders are highly regulated financial institutions. Many are the alternative lending divisions of well-known financial companies or are publicly-traded monoline lenders (like Home Trust, Equitable Bank, and others). They are a stable and professional part of the mortgage industry.

Who Do They Lend To? The "Close to Prime" Client

B-Lenders serve the vast group of Canadians who are "close to prime" but have a small blemish on their application. Their ideal client profile includes:

Bruised Credit: Homeowners with "fair" credit scores, typically in the 580-680 range. This could be due to a few past late payments or a previous consumer proposal or bankruptcy that has been successfully discharged for at least two years.

Self-Employed Income: B-Lenders are experts at working with self-employed individuals who can't meet the rigid two-year income history required by 'A' lenders. They often have programs that allow qualification based on 12 or even 6 months of business bank statements.

Non-Traditional Income: They are more flexible in using income from sources like the Canada Child Benefit (CCB) or disability payments.

How They Work: "Common-Sense" Underwriting

While 'A' lenders often rely on automated systems that make rigid yes/no decisions, B-Lenders use a more "common-sense" underwriting approach. They still perform a full review of your income and credit, but their human underwriters are empowered to look at the whole story. If your credit is slightly bruised but you have a large down payment and stable income, they can make an exception where a big bank cannot.

B Lender Rates and Fees

B-Lender interest rates are a middle ground. They are higher than the rock-bottom rates offered by 'A' lenders but are significantly lower than private mortgage rates. You can typically expect a B-Lender rate to be 1% to 2% higher than a comparable 'A' lender rate. In addition to any broker fees, B-lenders also typically charge a one-time lender fee of 1% of the loan amount, which can usually be added to the mortgage balance.

A Deep Dive into Private Lenders

Private lenders are a completely different category. They are not institutions but investors, and they follow a different set of rules.

Who Are They? Investors and MICs

Private lenders are either wealthy individuals or professionally managed Mortgage Investment Corporations (MICs) that pool capital from many investors. They are investing their own money into mortgages. While the industry is professional, they are not regulated in the same way as banks or B-Lenders.

Who Do They Lend To? The "Asset-Focused" Client

Private lenders are "equity-based" or "asset-based" lenders. Their decision is based almost entirely on the quality and value of the real estate, not the borrower's personal income ratios. They are the right fit for situations where the property is the strongest part of the application:

Major Credit Issues: Borrowers with very low scores or an active consumer proposal that a B-Lender can't approve.

Unprovable Income: Individuals who truly cannot document their income in any traditional way.

Unique Properties: Financing for properties that scare off institutional lenders, such as rural properties, land, or buildings in need of major construction.

Urgency: Situations that require funding in a matter of days, not weeks, such as stopping a power of sale or closing a deal with a very short timeline.

How They Work: "Equity-Based" Lending

The private lender's primary focus is on the property's Loan-to-Value (LTV) ratio. They want to see a lot of equity in the home. They will also want to see a clear and viable "exit strategy"—a plan for how you will pay them back at the end of the short 1- or 2-year term.

Private Lender Rates and Fees

Private lending is the most expensive of the three tiers. The higher rates and fees reflect the higher risk the investors are taking on. You can expect higher interest rates, a lender fee (1-3%), a broker fee (1-4%), and the requirement for you, the borrower, to pay the legal fees for both your own lawyer and the lender’s lawyer.

Choosing Between B Lenders vs. Private Lenders

The choice between a B-Lender and a private lender in Ontario is not random; it’s a strategic decision made by an experienced mortgage broker based on the specific problem a client needs to solve. A B-Lender is the right tool for a good client who just needs a bit of flexibility. A Private Lender is a specialized tool for complex, asset-rich, or urgent situations where speed is essential.

A broker's job is to find the right tool for the job. We analyze your situation and place you with the lender that offers the lowest cost and the clearest path forward. The ultimate goal is always to solve the temporary issue and create a plan to get you back to an 'A' lender in the future.

If you've been turned down by your bank, your journey isn't over. It just means you need a different kind of map. Contact our brokerage today, and we'll analyze your situation to determine which alternative lending solution is the right fit for you.

Get Personalized Advice

with an Award-Winning Mortgage Broker

4.9 from 812 reviews

Schedule My Call