Short answer first. A B lender (also called an alternative lender) approves files that prime lenders decline: bruised credit, self-employed income the tax returns undersell, or unusual properties. You pay for that flexibility with a higher rate, usually a lender fee, and typically at least 20% down. Used properly, a B lender is a bridge with a planned exit. Used lazily, it's an expensive place to get parked. This guide is about knowing the difference.
Who actually ends up at a B lender
Self-employed borrowers whose write-offs shrink their taxable income below what the purchase needs. B lenders can qualify you on bank statements instead of tax returns.
Bruised credit: a consumer proposal, a rough divorce year, a business that went sideways. B lenders read the story, not just the score.
CRA arrears: some B lenders will fund a refinance specifically to clear a tax debt that's blocking a prime approval.
Unusual properties that prime guidelines choke on, while a human underwriter at a B lender can look at the actual file.
What it costs
Three things separate a B mortgage from a prime one. The rate is higher, commonly by one to two percentage points depending on the file. There's usually a lender fee of around 1% of the mortgage, paid on closing. And terms are shorter, often one or two years, because nobody intends for you to stay. You'll also generally need 20% or more down or equity. Exact numbers depend entirely on your file, which is why I won't print a rate here, and why anyone who quotes you one before seeing your documents is guessing.
The B lender question isn't “what's the rate?” It's “what's the exit?” A good B mortgage comes with a written plan for leaving it.
The exit plan is the whole point
Here's how a healthy B file works. Year one: the B lender funds the purchase or refinance, and we name the specific thing being fixed, two years of cleaner tax filings, a proposal falling off the credit report, the CRA balance cleared. Year two: we check progress. At renewal: the file moves to a prime lender at prime pricing. That's the bridge working as designed. When I place a file with a B lender, the exit criteria get written down on day one, because a bridge with no far bank is just a pier.
Red flags worth walking from
A few things should make you pause, whoever you're working with. A broker who leads with the B option before exhausting prime lenders. Fees that appear late in the process instead of being disclosed up front, BCFSA rules require disclosure, so surprise fees are both a red flag and a compliance problem. And any pressure to sign quickly. If you're being rushed toward expensive money, slow down and get a second opinion; my guide on choosing a broker has the full checklist. For the self-employed version of this story, start with the self-employed mortgage guide.
Frequently asked questions
Is a B lender the same as a private lender?
No. B lenders are established institutions, including trust companies regulated federally, with rates modestly above prime lenders. Private lenders are individuals or funds, cost significantly more, and suit only short-term situations with a clear exit.
How long do people usually stay with a B lender?
Commonly one to three years. The term is short by design: fix the thing that blocked the prime approval, then move to a prime lender at renewal.
Do B lenders require a bigger down payment?
Generally yes, at least 20% down or equivalent equity, and sometimes more depending on the property and file.