A Lender vs B Lender vs Private Lender in Canada
Who each tier lends to, what it charges, and how to move back up the ladder
Quick answer: An A lender is a bank, credit union or prime monoline that offers its best rates to borrowers with solid credit and income they can document. A B lender (also called an alternative lender) accepts files that fall outside those rules, such as bruised credit or harder-to-prove self-employed income, in exchange for a higher rate, a lender fee and usually a shorter term. A private lender, including a mortgage investment corporation (MIC), lends mainly against the property's equity, charges the most and expects a short term with a clear exit plan. The same borrower can pay roughly twice as much in the first year at a private lender as at an A lender.
This guide compares the three tiers side by side: who regulates them, how each qualifies you, what they typically charge, and how to move back up the ladder. Rates are drawn from RateShop's published rate board and private lender rate sheet, and every calculation uses Canadian mortgage arithmetic.
The three lender tiers at a glance
| A lender | B lender | Private lender | |
|---|---|---|---|
| Who lends | Banks, credit unions, prime monolines | Alternative lending divisions, trust companies, some monolines | MICs, private funds, individual and syndicated lenders |
| Main approval lens | Credit score, documented income, debt ratios | Credit story, income flexibility, equity | Equity in the property and your exit plan |
| Stress test | Applies at federally regulated lenders | Applies at federally regulated alternative lenders | OSFI's qualifying rate does not apply |
| Typical pricing | Lowest published rates on the market | Often 1 to 3 percentage points above A-lender rates | Median published starting rate of 7.25% on first mortgages |
| Lender fee | Usually none | Often around 1% | Commonly 1% to 3% on firsts, more on seconds |
| Typical term | 1 to 10 years | 1 to 3 years | 6 months to 2 years |
| Best used for | Long-term, lowest-cost borrowing | A bridge back to A-lender pricing | Short-term needs with a defined way out |
Ranges are typical, not guaranteed. Where your file lands depends on the full picture: credit, income, down payment or equity, property type and location.
A lenders: banks, credit unions and prime monolines
A lenders are what most Canadians picture when they think of a mortgage: the big banks, provincial credit unions and broker-channel monolines lending on prime terms. RateShop's bank mortgage lender directory profiles 11 banks, alongside 17 monolines and 9 credit unions.
How they qualify you. Federally regulated lenders must apply the Office of the Superintendent of Financial Institutions (OSFI) minimum qualifying rate, known as the stress test, when approving new uninsured mortgages. That means proving you could afford payments at the greater of your contract rate plus two percentage points or 5.25%. For insured mortgages (less than 20% down), the default insurer's rules also apply. CMHC, for example, requires at least one borrower or guarantor to have a credit score of 600 or higher and allows a gross debt service ratio up to 39% and a total debt service ratio up to 44% for borrowers with a strong payment history. Individual lenders often set stricter internal thresholds than those minimums.
What they cost. The lowest published five-year fixed rates on RateShop's board were 4.09% for insured and 4.29% for uninsured mortgages as of September 8, 2026. Most A-lender mortgages carry no lender fee.
Who they don't suit. Borrowers with recent credit problems, short self-employment history, income that is hard to verify on paper, or debt ratios above the limits. That is where B lenders come in.
B lenders: alternative lenders for files that don't fit the template
B lenders are regulated institutions that specialize in borrowers outside A-lender guidelines. Many are federally regulated, including alternative lending arms of Schedule I banks. RateShop's alternative (B) lenders compared page lists profiles such as Haventree Bank and National Bank's Optimum Mortgage.
How they qualify you. A B lender still reviews credit, income and debt service, but it can accept more: a past consumer proposal, stated or less conventional self-employed income, higher debt ratios, or a borrower new to Canada. Federally regulated alternative lenders still apply OSFI's stress test on uninsured lending. Most B-lender mortgages are uninsured, so expect to need at least 20% down or 20% equity.
What they cost. Canadian brokerages commonly report B-lender rates running about 1 to 3 percentage points above equivalent A-lender pricing, with a lender fee often around 1% of the mortgage. The premium narrows as the file strengthens: a borrower with good credit and complex income may pay much less than one rebuilding from a recent bankruptcy. Terms are usually one to three years, which suits the goal of moving back to an A lender at renewal.
If credit is the obstacle, RateShop's bad credit mortgage guide explains which lenders consider which credit events. If the challenge is income documentation, see self-employed mortgages in Canada.
Private lenders: equity first, short terms, highest cost
Private lenders include mortgage investment corporations, private mortgage funds and individual or syndicated investors. They are not bound by OSFI's qualifying rate. Instead, they lend primarily on the value of the property and on how you will repay or refinance the loan. In Ontario, for example, the brokerages and administrators arranging these mortgages are licensed by the Financial Services Regulatory Authority (FSRA). RateShop's guide to private mortgages in Canada covers regulation, fees and predatory-lending warning signs in depth.
What they cost, from RateShop's private rate sheet. RateShop tracks published starting rates from 103 private and alternative lending programs, last updated September 5, 2026:
- First mortgages: median published starting rate of 7.25%, with the middle half of programs between 5.99% and 8.49%.
- Second mortgages: median of 9.25%, with the middle half between 8.95% and 10.00%.
- Maximum loan-to-value: 75% was the most common cap among programs that publish one (29 of 67), and 11 programs went to 85%.
- Fees and terms: published lender fees commonly run 1% to 3% on first mortgages and higher on seconds; terms mostly range from six months to two years.
These are starting rates, which only the strongest private files receive. Broker fees, legal costs and an appraisal are usually added on top. Compare live figures on the private second mortgage rate table or browse 40 private mortgage lenders compared.
When private lending makes sense. Closing a purchase when a bank declines late, consolidating arrears to stop a power of sale, bridging between properties, or financing a property type conventional lenders avoid. In every case, decide the exit before you sign: a sale, a refinance with a B or A lender, or a lump-sum payoff.
What the same $400,000 costs at each tier
To make the gap concrete, here is the first-year cost of a $400,000 mortgage at each tier, using illustrative rates within the ranges above.
| Tier and assumptions | Monthly payment | First-year interest | Lender fee | First-year cost |
|---|---|---|---|---|
| A lender: 4.29%, 25-year amortization | $2,167 | $16,831 | $0 | $16,831 |
| B lender: 5.79%, 25-year amortization, 1% fee | $2,510 | $22,693 | $4,000 | $26,693 |
| Private lender: 7.25% interest-only, 2% fee | $2,417 | $29,000 | $8,000 | $37,000 |
Two details stand out. The private monthly payment looks lower than the B-lender payment only because it is interest-only: after 12 months, the private borrower still owes the full $400,000, while the A and B borrowers have paid down principal. And the fees are charged again if you renew or replace a short-term mortgage with another one, which is why staying at the B or private tier longer than necessary gets expensive. Model your own figures with the private mortgage calculator.
Assumptions: A and B examples use monthly payments with Canadian semi-annual compounding; the private example assumes simple monthly interest-only payments. Broker, legal and appraisal costs are excluded. Rates are illustrative, not offers.
How lenders decide which tier you land in
| Factor | Usually fits an A lender | Often points to a B lender | Often points to a private lender |
|---|---|---|---|
| Credit | Established history, recent payments on time | Past delinquencies, discharged proposal or bankruptcy | Recent or unresolved credit problems, arrears |
| Income | T4 employment or two years of self-employed returns | Shorter or stated self-employed income | Income that cannot be verified in time |
| Debt ratios | Within insurer and lender limits | Above A-lender limits | Not the main test |
| Equity | From 5% down (insured) | Typically 20% or more | Commonly 15% to 35% or more |
| Timing | Standard approval timelines | Standard approval timelines | Urgent closings, arrears or bridging |
The table is a guide, not a rulebook. Lenders weigh factors together, and a strong file in one area can offset a weakness in another. That is also why the lowest advertised rate is rarely the rate a given borrower qualifies for.
Moving up a tier: the exit plan
B and private mortgages work best as bridges. A realistic plan to move back to lower-cost borrowing usually includes:
- Choosing a term that matches the fix. If credit needs time to recover, a one- or two-year term lets you requalify sooner.
- Rebuilding credit deliberately. Keep every payment on time, lower revolving balances and let recent derogatory items age.
- Documenting income. Self-employed borrowers can move up faster by filing taxes that show the income lenders need to see.
- Protecting equity. Avoid adding debt against the property, so the loan-to-value supports the next lender's limits.
- Starting early. Begin comparing lenders several months before the term ends; the mortgage renewal guide explains the timeline.
Frequently asked questions
What is the difference between a B lender and a private lender?
B lenders are typically regulated institutions that underwrite your credit and income under more flexible rules, usually on one- to three-year terms. Private lenders, including MICs, focus mainly on the property's equity and your exit plan, charge higher rates and fees, and usually lend for six months to two years.
Do B lenders use the mortgage stress test?
Federally regulated alternative lenders apply OSFI's minimum qualifying rate to uninsured lending, the greater of the contract rate plus two percentage points or 5.25%. Private lenders are not bound by OSFI's qualifying rate.
What credit score do I need for an A lender?
There is no single number. For an insured mortgage, CMHC requires at least one borrower or guarantor to have a score of 600 or higher, but individual banks often set higher internal thresholds for their best rates. Credit history, income and debt ratios are assessed together.
Is a private mortgage the same as a second mortgage?
No. A private lender can provide a first or a second mortgage. A second mortgage sits behind an existing first mortgage, carries more risk for the lender and is usually priced higher. In RateShop's private rate sheet, the median published starting rate was 7.25% for firsts and 9.25% for seconds.
Will using a B lender hurt my credit?
The type of lender is not what affects your score; your payment history and credit use are. Paying a B-lender mortgage on time can help rebuild the credit profile needed to qualify with an A lender later.
How long should I stay with a B or private lender?
Only as long as it takes to fix what kept you from qualifying at a lower tier. Build the exit into the plan from day one, and review your options well before each term ends.
The bottom line
A, B and private lenders are not better or worse versions of each other; they price different levels of risk. The right tier is the lowest-cost one that will actually approve your file today, with a plan to move up as your situation improves. Before accepting a higher-cost mortgage, confirm a lower tier has genuinely said no, and understand every fee.
Next step: compare uninsured mortgage rates for A-lender pricing, review lender profiles by tier, or get matched with a licensed mortgage broker who can tell you which lenders will consider your file.
How we sourced this: A-lender rates come from RateShop's rate board as of September 8, 2026; private rates, fees, loan-to-value caps and terms come from RateShop's private and alternative lender rate sheet of 103 programs as of September 5, 2026, summarized as medians and middle-half ranges. B-lender pricing ranges reflect figures commonly reported by Canadian brokerages. See our editorial policy for how RateShop checks figures.
This article is general information, not financial or legal advice. Lender criteria change and depend on the full application; a licensed mortgage professional can assess your options.
Sources
- OSFI: Minimum qualifying rate for uninsured mortgages
- CMHC: Underwriting criteria for homeowner mortgage loan insurance
- CMHC: Mortgage loan insurance program fact sheets
- Financial Services Regulatory Authority of Ontario
- RateShop.ca rate board (September 8, 2026) and private lender rate sheet (September 5, 2026)
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