Definition
The risk premium is the rate increase a lender applies to compensate for the additional risk associated with an atypical mortgage file.
**Triggering factors**: - Credit score < 680: +0.25 to +1.5% - LTV ratio > 80% (uninsured): +0.15 to +0.5% - Non-salaried income (self-employed, commission): +0.10 to +0.5% - Atypical property (commercial building, rural, age >50 years): +0.25 to +1.0% - Amortization > 25 years: +0.10 to +0.25% - Recent default history: +0.5 to +2.0% (or refusal)
**Niche lenders**: Files with multiple risk premiums are often directed to alternative (Tier B) or private lenders who accept more complex profiles in exchange for higher rates.
**Lenders A, B and C**: - **Tier A** (chartered banks, credit unions): best rates, strict criteria - **Tier B** (alternative lenders: Équitable Bank, B2B, MCAP): relaxed criteria, rates +1-3% - **Tier C / Private**: very relaxed criteria, rates +3-8% (or more)
**Rehabilitation strategy**: A borrower starting with a B lender can migrate to an A lender at renewal if their profile has improved (credit score, stable income, reduced LTV). Goal: pay the risk premium temporarily, not permanently.