I often hear a lot of misconception and stigma around B lenders and B lending in general when it comes to mortgages.
The belief around these types of lending seems to be attached to the idea that you must be a second-class citizen to go to a B lender, which this is far from truth, and we will address the B lending in this blog in more details.
Before we delve into B lending, first it’s important to have a broad understanding of the lending options available here in Canada.
Lenders are generally categorised in 3 different groups:
A lenders- which includes but not limited to, high street banks, Credit unions, Monoline Lenders and Insurance Companies.
B lenders- which in some cases can be a subsidiaries of A lenders.
Finally Private Lenders (AKA C Lenders) that includes MIC (Mortgage Investment Corporations) as well as Private individuals or businesses who can provide financing.
Now that we have covered the 3 different main category of the lenders we can focus more on the second group, ‘The B Lenders’.
Just like A lenders most B lenders are regulated either at federal level or provincial level, which means they are still obligated to comply by rules and regulations set out for them by the federal or local authorities. However, on the basis that they can take on more risks in comparison to A lenders, they are often able to qualify the applicant more money than their counterpart, A lenders.
This extra risk taking comes with a price and hence B lenders usually charge a fee (often 1%) and in some cases their interest rates could be slightly higher than A lender, although this is not always the case. i.e., at the time of writing this blog some B lenders 1- and 2-year rate products are lower than high street banks.
To put things in a better perspective a client can qualify for a certain amount mortgage with an A lender and that very same client can qualify for a substantially higher amount of mortgage with a B lender.
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In conclusion, contrary to the common belief, B lenders are not for second class citizen type of clients. They merely can qualify the consumer for higher mortgage amount in comparison to A lenders.
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