B Lender vs Private Lender: Which Is Cheaper, and When?

The bank said no. Now two words keep coming up in every search you run: B lender and private lender. They sound like the same rescue plan. They are not.

One is a regulated alternative bank that will look closely at your file and, if the numbers work, price you at a small premium over a big-bank rate. The other lends mostly on the equity in your home, moves fast, and charges accordingly.

Here's the thing most people get backwards. Private isn't a step up from a B lender. It's a step further out. If a B lender can approve you, it is almost always the cheaper road. Private money is what you reach for when a B lender can't get there in time, or can't get there at all.

So the real question isn't "which is better." It's "which one do I actually qualify for right now" — and this is where a B lender mortgage in Ontario and a private mortgage part ways.

Where each one sits on the ladder

Canada's mortgage market runs in tiers, and knowing your tier tells you your price.

• A lenders — the big banks, credit unions and monolines. Lowest rates, strictest rules, and they must apply OSFI's stress test (qualifying you at the higher of your rate + 2% or 5.25%). If you're reading this, an A lender probably already passed.
• B lenders — regulated alternative lenders like Home Trust, Equitable Bank, MCAN and Community Trust. They bend on credit, income proof and debt ratios where a bank won't, and they charge a modest premium for it.
• Private lenders and MICs — individuals, syndicates and Mortgage Investment Corporations. They lend mainly against your home's equity, fund the fastest, and cost the most. Terms are short.

A B lender is still a lender in the traditional sense: it wants to see that you can carry the payment. A private lender is really an equity lender: it wants to see that there's enough value in the home to protect the loan if things go sideways. That single difference drives everything below — the rate, the fees, the term, the speed.

Side by side: B lender vs private lender

These are typical ranges on Ontario files, not quotes. Every one of them moves with your specific situation and the market.

What matters	B lender	Private lender
Credit	Bruised but recovering — roughly 600–680 is core territory, sometimes a bit under with a good story.	Often below 600, or right after a credit event. Score matters less than equity.
Income proof	Flexible — bank statements, self-employed programs — but they still want to see income.	Lightest. The equity carries the file more than the paystub.
Rate	Roughly 1–2% above a comparable bank rate.	Roughly 8–12% on a first mortgage; 10–15% on a second.
Fees	Lender fee around 1% of the mortgage.	Lender fee ~1–4%, plus a brokerage fee often ~1–2%, plus legal and appraisal costs.
Term	1–3 years, with room to graduate back to an A lender.	Usually 1 year (sometimes 2). Interest-only is common.
Max LTV	Around 80% on a refinance.	First mortgage typically to ~75%; second to ~80–85% combined.
Speed	Days to a couple of weeks — real underwriting.	Days. Sometimes faster when a deadline is real.

LTV above just means loan-to-value — how much you're borrowing measured against what your home is worth. It's the number a private lender cares about most.

Why the B lender is almost always cheaper

Run the money on a $400,000 first mortgage.

At a B lender near 6.5% with a 1% fee, you're looking at roughly $4,000 in lender fee and interest in the mid-$25,000s over a year. At a private lender near 10% with total fees around 3%, that's roughly $12,000 in fees plus about $40,000 in interest across the same year — before legal and appraisal.

Those aren't quotes. They're the shape of the gap. On most files, the all-in cost of private money runs well north of a B lender, and the fees hit up front.

One thing to keep in mind: since January 1, 2025, the federal criminal interest rate is 35% APR, all-in — and that cap counts most fees, not just the interest. On a small second mortgage, stacked flat fees can push the effective APR up faster than people expect. A licensed mortgage agent has to disclose every fee in writing, which is exactly how you catch that.

Three files, three answers

The decision gets clearer with real situations.

1. Bruised but recently clean → B lender

You had a rough couple of years — a late stretch on a credit card, maybe a collection you've since cleared. Your score sits around 620 and it's been trending up for eight months. You have steady income you can document, even if it's self-employed. This is a B lender file. They'll take the recent good behaviour, price you at a premium over the bank, and give you a term long enough to rebuild.

2. Power of sale next month, equity-only → private

You've fallen behind, a Notice of Sale has landed, and the redemption window is closing. There's real equity in the home, but your income won't pass a B lender's underwriting on the timeline you have. This is where private money earns its cost: it can fund in days, off the equity, to stop the sale and buy you room to plan the next move. It's expensive on purpose — it's a bridge, not a home.

3. Self-employed, strong equity, thin paper → depends on the calendar

You've got 45% equity and a good business, but two years of write-offs make your income look small on paper. With time, a B lender's self-employed program may well approve you. Under a hard deadline, private might be the only door that opens fast enough. Same borrower — the answer turns on how much runway you have.

Private should be the fallback, not the plan

Put simply: if a B lender can approve you, take it. The premium over a bank is real but manageable, the term is longer, and the fees are lighter. You reach past it to private only when speed, credit, or income proof rule a B lender out — and even then, you go in treating it as temporary.

One consumer-protection point worth knowing: in Ontario, a private mortgage can only be arranged by a Level 2 licensed mortgage agent or a mortgage broker. That licence exists to make sure the fees are disclosed and the deal is suitable. If someone offers you private money without it, that's a red flag, not a shortcut.

The part everyone forgets: the exit

Neither of these is meant to be forever. The whole point of alternative lending is the round trip — get funded now, clean things up, and move back to a bank when your file can pass again.

That's easier than it used to be. As of November 21, 2024, OSFI no longer prescribes the stress test on an uninsured straight switch at renewal — moving your mortgage to a new lender at term-end without increasing the balance or amortization. Lenders still check affordability, but that change removed a hurdle that used to trap people in alternative rates longer than they needed.

So before you sign anything, ask the exit question out loud: what does my file need to look like in 12 months to qualify at a bank again? A good agent will build the term around that answer. If you want to see how private financing is structured in the first place, our overview of private mortgage lenders in Ontario walks through the fees and terms in detail.

Frequently asked questions

Is a B lender always cheaper than a private lender?

In most cases, yes. A B lender's rate typically runs about 1–2% above a comparable bank rate with roughly a 1% fee, while private firsts often sit around 8–12% with fees of 1–4% plus legal and appraisal costs. If a B lender can approve your file, it's usually the cheaper route by a wide margin.

Can I qualify for a B lender with a 620 credit score?

Often, yes. Roughly 600–680 is core B-lender territory, especially if the recent trend is positive and you can document income. Below about 600, or immediately after a credit event, equity-based private lending is more likely to be the option that funds.

Why would anyone choose a private lender if it costs more?

Speed and flexibility. Private lenders lend mainly on equity and can fund in days, which matters when a deadline is real — like a power of sale — or when income can't be proven in time for a B lender's underwriting. It's a bridge you use on purpose, then exit.

How long am I stuck in an alternative mortgage?

Usually not long. B-lender terms often run 1–3 years and private terms are typically 1 year. The goal is to rebuild your file and move back to an A lender at renewal. Since November 2024, an uninsured straight switch at term-end no longer triggers OSFI's stress test, which makes that move easier.

Do I need a special licence to get a private mortgage in Ontario?

You don't, but the person arranging it does. In Ontario, private mortgages may only be arranged by a Level 2 licensed mortgage agent or a mortgage broker. That's a consumer-protection rule, and it's why every fee has to be disclosed to you in writing before you commit.