What is an Alternative Lender?
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An alternative lender, often referred to as a B lender, offers more flexible mortgage approval criteria compared to traditional lenders. These lenders are essential for Canadian homebuyers and homeowners who may not meet the stringent requirements of big banks. Whether you’re looking to buy or keep your home, alternative lenders can provide viable solutions.

Why Consider an Alternative Lender?

Higher mortgage rates and rising home prices have made it increasingly challenging for Canadians to qualify for traditional mortgages. Big banks usually require good credit and straightforward income sources, which not everyone has. That’s where alternative lenders come in, offering more lenient qualification criteria and focusing more on the bigger financial picture or home equity as security.

The Growing Demand for Alternative Lenders

With over 2 million mortgage renewals expected in 2024 and 2025, more homeowners are turning to alternative lenders due to the tougher qualifying rules of traditional lenders. At True North, our expert brokers can guide you to cost-effective renewal options that could save you money.

What Are Alternative Lenders and Products?

Alternative lenders provide mortgage solutions that differ from traditional (A) lenders, who offer one-size-fits-all products with strict qualification criteria. B lenders, on the other hand, offer more personalized assessments and consider a broader range of financial details, often including home equity as a significant factor in loan approval.

Understanding the Rates and Costs

Due to the increased risk taken by alternative lenders, the mortgages they offer typically come with higher rates and fees. Despite these higher costs, alternative mortgages can be crucial for those needing time to improve their financial situation or those who require a tailored lending solution.

When to Use an Alternative Mortgage Solution

Here are some scenarios where an alternative lender might be beneficial:

• Debt Consolidation: To improve your credit score.
• Bridge Loans: When selling and buying a new home simultaneously.
• Additional Mortgages: Adding a second or third mortgage instead of refinancing.
• Non-Traditional Income: For self-employed individuals or those with commission-based income.
• Divorce: A short-term solution to help transition ownership.
• Job Relocation: Buying a new home before selling the current one.

Who Are Considered Alternative Lenders?

The term “alternative lender” can refer to any mortgage provider outside of the Big Six banks (RBC, TD, Scotiabank, BMO, CIBC, and National Bank). This includes smaller regional banks and non-bank lenders such as credit unions, trust companies, and mortgage finance companies (MFCs).

Private Lenders: The Last Resort

Private lenders, who offer loans using their own capital, fall under the alternative lender category but are typically a last resort due to higher rates and fees and less regulatory oversight. They focus primarily on the property’s equity and location.

Can Alternative Lenders Help with the Mortgage Stress Test?

Most alternative lenders are required to use the federal stress test, but non-bank lenders might offer more competitive rates, which can help improve your affordability metrics.

What is an Alt-A Product?

Alt-A products are traditional insured mortgage programs for homebuyers with less than a 20% down payment. These products cater to self-employed individuals or those with complex income sources and often come with lower rates due to default insurance backing.

Can You Get a Mortgage with Poor Credit?

Yes, it is possible to obtain a mortgage with poor credit, depending on your equity, the property’s location, and other factors. Alternative lenders provide options for those looking to rebuild their credit and eventually transition to traditional mortgage products.