The Difference Between Institutional (A Lenders), Alternative Institutional (B Lenders) and Private Lenders

There are many different types of lenders and mortgage programs in Canada, which is great news for you! Your situation depends on what type of loan you should apply for, as there are many benefits and drawbacks to each. 

Institutional, more commonly known as A lenders, are traditional, high credit score lenders such as major chartered banks. These lenders typically have the lowest interest rates, more favorable terms, and they usually require a strong credit score and a low debt-to-income ratio. These are ideal for borrowers who have a good credit history and a steady income. The drawbacks to these types of lenders is that they have incredibly high qualification standards that might limit a client’s ability to obtain access to increased equity. Self employed individuals, as well as those with a previous bankruptcy or consumer proposal typically find it difficult to work with these types of lenders. 

Alternative Institutional, also known as B Lenders, are non-traditional lenders, such as credit unions or banks, with unique mortgage programs that offer loans to borrowers who may not meet the strict criteria of A Lenders. B Lenders typically offer higher interest rates and fees. These lenders may be a good option for borrowers who are self employed, have poor credit, high debt levels, or inconsistent income. They also typically offer longer amortization periods and allow clients to increase their purchasing power or the amount of equity they can access from their property. 

Private lenders are institutional or individual lenders who lend money directly to borrowers. Private lenders are often used as a last resort for borrowers who cannot qualify for loans from A or B Lenders. Private mortgages usually come with much higher interest rates and fees than A or B loans. These types of lenders tend to be incredibly creative and very lenient when it comes to qualification, with some private lenders even forgoing income verification. Private mortgages are specifically designed for short terms, typically 1-3 years, and are utilized by borrowers to help them get back with Institutional or Alternative Institutional lenders. The payments are typically interest-only and an exit strategy is a MUST for these types of lenders. Pursue a private lender to help consolidate debt, obtain additional equity for renovations, or close on a mortgage transaction quickly. 

Interested in discussing the many mortgage programs available to you? Book a call with us today for a no-obligation consultation to ensure you are in a mortgage program that is best for you!