A Lender vs B Lender vs Private Lender: What’s the Difference?

A lenders are the big banks and credit unions with the lowest rates and the strictest rules. B lenders are trust companies and alternative lenders that approve borrowers with bruised credit or harder-to-prove income, at higher cost. Private lenders are individuals or pooled funds that lend mainly on the property’s equity, usually for short terms and the highest rates.

What is an A lender?

A lenders are the major banks, large credit unions and big monoline lenders you see advertising rates. They are federally or provincially regulated and follow tight underwriting rules. In return, you get their lowest rates and the widest choice of products.

To qualify with an A lender, you generally need:

• A solid credit history with no recent missed payments, collections or bankruptcy.
• Income you can prove with T4s, pay stubs, a job letter or two years of tax returns if you’re self-employed.
• Debt levels that fit within the lender’s ratio limits.
• A pass at the stress test: the higher of your contract rate plus 2% or 5.25%.

As of September 2026, typical advertised 5-year fixed rates sit in the mid-4% range. That means most buyers qualify at roughly 6.5%, which is why the stress test is the biggest hurdle for many bungalow shoppers in Brampton, Vaughan or Oshawa.

What is a B lender?

B lenders, also called alternative lenders, include trust companies and some credit unions. They still use formal underwriting, but they look at the whole story rather than a checklist. They are a common fit for self-employed buyers, newcomers to Canada with a short credit history, and people rebuilding after a rough patch.

Expect a few trade-offs. Rates are higher than A lenders. Many B lenders charge a lender fee on top of the broker’s fee. They usually want a larger down payment, often 20% or more, and terms tend to be shorter, commonly one to three years.

What is a private lender?

Private lenders are individuals, small investor groups or mortgage investment corporations. They lend mainly on the value of the property and the strength of your exit plan. Your credit score and income matter far less.

Private mortgages are usually interest-only, last six months to two years, and come with the highest rates. You’ll also pay lender and broker fees, plus legal costs for both sides. They are a tool for specific situations, such as closing on time when a bank deal falls through, buying a fixer-upper bungalow that a bank won’t finance, or bridging until a sale closes.

A lender vs B lender vs private lender: side-by-side

Feature	A lender	B lender	Private lender
Who they are	Banks, big credit unions, monolines	Trust companies, alternative lenders	Individuals, investor pools, MICs
Credit needed	Good to excellent	Fair or recovering	Flexible
Income proof	Strict	Flexible, stated or bank statements	Minimal
Typical down payment	As low as 5% (insured)	Often 20%+	Often 20% to 35%+
Rates	Lowest	Higher	Highest
Fees	Usually none	Lender fee common	Lender and broker fees
Typical term	1 to 10 years	1 to 3 years	6 months to 2 years

When does each type of lender make sense?

Choose an A lender when you can

If your credit is solid and your income is easy to document, an A lender is almost always the cheapest route. Insured mortgages are only available through A lenders, and first-time buyers can now get a 30-year amortization on insured loans.

Use a B lender as a stepping stone

A B lender can get you into a home a year or two sooner while you rebuild credit or build a tax history. Plan to renew or switch to an A lender once you qualify.

Use private money only with a clear exit

Before you sign a private mortgage, write down exactly how you’ll pay it off. Common exits are selling another property, refinancing after a renovation, or moving to a B lender once a credit issue clears.

Mistakes to avoid with alternative and private lending

• Ignoring the total cost. Add up rate, lender fee, broker fee and legal costs, not just the rate.
• Skipping the renewal plan. Short terms renew fast. Know what happens if your situation hasn’t improved.
• Not reading prepayment terms. Some private loans charge a set number of months’ interest if you pay early.
• Working with an unlicensed broker. In Ontario, mortgage agents and brokers must be licensed with FSRA, the provincial regulator.

For a broader look at lender options, read our guide on how to choose the right mortgage agent. If you’re investing, our post on private mortgages for investors goes deeper.

Frequently asked questions

Is a B lender bad for my credit?

No. A B lender mortgage reports to the credit bureaus like any other loan. Paying it on time can help rebuild your credit and move you back to an A lender.

Can I get a B lender mortgage with 5% down?

It’s rare. Most B lenders want at least 20% down because their mortgages are not covered by default insurance.

Are private mortgages legal in Ontario?

Yes. Private lending is legal and common, but brokers arranging them must be licensed with FSRA. Always have a real estate lawyer review the commitment before you sign.

How do I move from a B lender back to a bank?

Pay every bill on time, lower your debt and build a documented income history. Start talking to a mortgage agent about six months before renewal.

The bottom line on A, B and private lenders

Each lender type has a job. A lenders are the cheapest long-term home for your mortgage, B lenders bridge a credit or income gap, and private lenders solve short-term problems at a premium.

Know your numbers before you shop. Use our mortgage calculators to test payments, and speak with a licensed mortgage agent about which lender fits your file.