You're self-employed, you have an atypical file, or the bank just declined your application. Someone mentions "B lenders" or "alternative lenders" as a possible path. Here's what that means concretely, what it costs, and most importantly — how not to get stuck there.
A lenders vs B lenders: the distinction
A lenders — traditional banks
The Big 6 (Royal, TD, BMO, CIBC, Scotia, National), Desjardins, and the large credit unions. They lend only to files that fit strict grids: provable income over 2 years with tax slips, credit score ≥ 660, TDS ratios ≤ 44%, stress test passed. Lowest market rates.
B lenders — alternative / monoline
MCAP, First National, Equitable Bank, Home Trust, B2B Bank, RFA, CMLS and several others. They lend to files A lenders refuse: self-employed with atypical returns, newcomer without Canadian credit history, non-standard property, credit reconstruction. Rates run 1-3% above A lenders, plus a lender fee typically around 1% of the loan.
C lenders / private lenders
Beyond B, there are private lenders: individuals or funds that lend at much higher rates (8-15%) over very short periods. Out of scope here — treat them as an emergency last resort, always through an AMF-licensed mortgage broker.
When a B lender is relevant
Five typical profiles where a traditional bank doesn't suffice:
- Self-employed with low declared income (legal tax optimization via deductible expenses). The net income on the tax return doesn't reflect real payment capacity. B lenders look at 12-24 months of business bank deposits.
- Newcomer without 2 years of Canadian credit history.
- Credit reconstruction after bankruptcy, consumer proposal, or divorce with score impact.
- Non-standard property — multi-unit of 5+ doors, rural property, cottage without four-season access, agricultural land.
- Recent bank refusal for a technical reason (TDS too tight, stress test missed by a small margin) — a B lender can accept with additional flexibility.
The real cost of a B lender
Comparing the same $350,000 loan over 5 years:
| Item | Typical A lender | Typical B lender |
|---|---|---|
| Contract rate | 4.79% | 6.49% |
| Monthly payment (25-year amortization) | $2,010 | $2,350 |
| Lender fee | $0 | $3,500 (1%) |
| Broker fee | $0 (paid by lender) | $0-3,500 (varies by lender) |
| Additional cost over 5 years | — | ~$24,000 |
Over 5 years, a B lender typically costs $20,000 to $30,000 more than an A lender for the same loan. That's the price of credit access when the traditional channel is closed.
The golden rule: the exit plan
No one should stay at a B lender longer than necessary. When you sign with a B, you must already have an exit plan to an A lender — typically at the end of the first term (12 or 24 months).
The typical exit plan:
- Year 1-2 at the B lender: you make payments on time, you build mortgage payment history, and your credit file consolidates.
- Months 18-20: an AMF broker prepares a complete file for submission to an A lender. By now, you have 18-24 months of clean mortgage payment history, your credit score has improved, and your declared income is stronger.
- Months 22-24 (maturity): transfer to an A lender. No penalty (contract expired), normal rate, savings of $20-30k over the next 5 years.
Without this plan, the risk is renewing at the B for another 24 months — another 1% fee, still at the B rate. Avoid this at all costs.
Term length at a B lender
The term at a B lender must be short: 12 or 24 months maximum. Never 5 years. Here's why:
- A 5-year term pays 5 years of rate premium with no natural short exit window.
- A 24-month term gives you a fast, predictable exit to an A lender.
- The IRD penalty at some B lenders can be very heavy if you break before maturity — which is another reason to negotiate a short term upfront.
Questions to ask before signing with a B lender
- What's the ideal term? Often 12 or 24 months — to get a fast exit window to an A.
- Is there a prepayment penalty? Ask for the formula, not just the amount.
- What are the total fees? Lender fee, broker fee, appraisal fee, notary fees — add everything up to compare honestly with an A lender.
- What criteria do I need to hit to move to an A lender at maturity? The broker should provide a clear roadmap: minimum declared income, target credit score, stability duration.
Common mistakes
1. Going straight to a B without testing A lenders
Many self-employed people assume "I'm self-employed, therefore B." Wrong. Several A lenders accept self-employed borrowers through specific programs (BFS, Bank Statement, stated income). Always test A lenders first.
2. Signing a 5-year term at a B lender
Five years of rate premium with no natural short exit. Always negotiate 12-24 months.
3. Not reviewing the file mid-term
If you wait for the B lender's renewal letter, it's too late for a clean A transfer. At 6 months from maturity, call an AMF broker to start preparing the transition.
What Courteo does
Courteo is not a broker. We connect you with a mortgage broker holding an AMF license who has access to both A and B lenders in Quebec, and who knows how to build a B file with a clear exit plan to an A. The worst thing to do with an atypical file is to present it in isolation to a single bank — that's exactly what a broker helps you avoid.
Frequently asked questions: B lenders in Quebec
Can I get a 5% down payment with a B lender?
No — B lenders don't offer CMHC-insured mortgages. The minimum down payment is generally 20% (conventional mortgage). This is one of the conditions that distinguishes A lenders (insured possible at 5%) from B lenders.
Does going through a B lender leave a negative mark?
Not directly. What can hurt is if you've accumulated multiple credit inquiries from approaching several lenders individually. An AMF broker does a single credit pull presented to multiple lenders — the right channel to protect your credit score.
Can I refinance with a B lender to consolidate debt?
Yes — this is one of the most common use cases. If your LTV (loan-to-value) is under 80% and your income is too atypical for an A, a B lender can enable consolidation. The exit plan back to an A at maturity remains the priority.
My file was refused by two banks. Does that hurt my chances at a B lender?
The reason for the refusal matters more than the fact of refusal. A refusal based on income ratios (self-employed, dividends) is often fixable at a B. A refusal based on credit history requires rebuilding first. An AMF broker reviews both declines and identifies the best path forward.