When financing investment properties, where you get your mortgage matters as much as the rate you pay. A lenders and B lenders serve different investor profiles and situations. Understanding the differences helps you make strategic financing decisions rather than simply chasing the lowest rate.
A Lenders: The Traditional Route
A lenders include Canada’s major banks (Big Five and others) and major credit unions. They offer the lowest rates and best terms because they lend to borrowers who present the lowest risk.
What A Lenders Require
- Credit scores of 680+ (some require 700+)
- Verifiable income meeting debt service ratio requirements
- Standard property types in acceptable locations
- Full documentation of income, assets, and liabilities
- Passing the mortgage stress test
- Typically fewer than five existing mortgages
What A Lenders Offer
- Best available interest rates
- Standard terms and conditions
- No lender fees (in most cases)
- Straightforward renewal processes
- CMHC-insurable products
For investors with clean credit, documented income, and smaller portfolios, A lenders are the clear first choice. The rate advantage over B lenders translates to thousands saved annually per property. If you are financing standard properties, residential mortgage financing helps you secure the best A lender rates available in the current market.
B Lenders: The Alternative Path
B lenders include trust companies, monoline lenders, and alternative financial institutions. They serve borrowers who don’t meet A lender criteria but still represent acceptable credit risk.
Who B Lenders Serve
Self-employed investors whose tax-optimized income reporting doesn’t meet A lender ratio requirements. These investors often have strong businesses but report income in ways that don’t satisfy traditional qualification calculations.
Investors with credit challenges. Past bankruptcies, consumer proposals, or credit rebuilding situations may disqualify you from A lending temporarily. B lenders bridge the gap while your credit recovers.
Portfolio investors exceeding A lender limits. Once you own four or five properties, many A lenders stop lending regardless of your income or credit. B lenders may continue financing additional properties. Understanding how to qualify for multiple rental properties provides additional strategies.
Non-standard property situations. Properties that don’t fit A lender criteria—unusual configurations, rural locations, mixed-use buildings—may require B lender flexibility.
What B Lenders Cost
B lender rates typically run 1-3% higher than A lender rates. Many charge lender fees of 1-2% of the mortgage amount. These additional costs add up significantly over a mortgage term.
On a $400,000 mortgage, a 2% rate premium costs an additional $8,000 per year in interest. A 1% lender fee adds another $4,000 upfront. Over a five-year term, the total premium easily exceeds $40,000.
Those numbers demand honest evaluation: does the deal justify the financing cost?
Not sure whether your credit score and debt service ratios qualify you for A lender rates or push you into B lender territory? Book a free strategy call with LendCity and we will review your numbers together.
When B Lending Makes Strategic Sense
Despite higher costs, B lender financing is sometimes the right choice.
The Deal Justifies the Cost
If a property’s returns comfortably absorb the higher financing cost and still deliver acceptable returns, the B lender premium is simply a cost of doing business. A deal producing 8% returns with B lender financing beats no deal at all.
Run the numbers with B lender costs included. If the deal still works, proceed. If it only works with A lender rates, either find A lender financing or pass on the deal.
Temporary Bridge to A Lending
Some investors use B lenders as bridges. They finance with a B lender when they can’t qualify with an A lender, then refinance to A lending once their situation improves—credit rebuilds, income documentation strengthens, or portfolio qualifies under commercial programs.
This strategy works when you have a clear path to A lending within one to two years. Staying with B lending long-term erodes returns significantly.
Speed or Flexibility Requirements
B lenders sometimes process faster than A lenders and may offer more flexible conditions. When deal timing is critical, B lender speed can justify the premium.
Scaling Beyond A Lender Limits
Investors who want to buy unlimited rental properties in Canada find B lenders extend your buying capacity, and the rental income from the property may help offset the rate premium through stronger cash flow qualification.
The Decision Framework
Ask yourself these questions when choosing between A and B lenders:
Can I qualify with an A lender? If yes, start there. Only move to B lending if A lending isn’t available or if specific deal characteristics require it.
Does the deal work with B lender costs? Run your analysis with actual B lender rates and fees. If the deal still produces acceptable returns, the financing source matters less than the deal quality.
Is this temporary or permanent? If you can see a path back to A lending, B lender financing is a strategic bridge. If you’ll be stuck at B lender rates indefinitely, that ongoing cost materially affects long-term returns.
What are the alternatives? Could you partner with someone who qualifies for A lending? Could you use a joint venture structure to access better financing? Could you wait until your situation improves?
If your portfolio has hit the four-or-five property ceiling with A lenders, book a free strategy call with us so we can explore B lender and commercial options that keep you scaling.
Beyond A and B: Private Lending
Private lenders—individuals or groups lending their own capital—represent a third option. Rates are higher still (often 8-15%+), terms are shorter, and costs are significant. To understand when private lending makes sense and how to get the best rates, see our complete guide. Private lending suits short-term situations like bridge financing or renovation projects where the loan will be repaid quickly.
Private lending as long-term investment property financing rarely makes economic sense. The costs erode returns to the point where holding the property may not be worthwhile. Reserve private lending for specific strategies like BRRRR where the loan is temporary by design.
Working With Your Broker
A good mortgage broker who works with investors accesses both A and B lenders and can present options across the spectrum. They should explain the cost differences clearly and help you evaluate whether B lender financing makes sense for specific deals.
Be cautious about brokers who steer you to B lenders when you qualify for A lending—the commission structure may incentivize this. Get independent confirmation of your A lender eligibility.
Frequently Asked Questions
Can I have mortgages with both A and B lenders simultaneously?
How do I move from B lending to A lending?
Do B lenders report to credit bureaus?
Are B lender mortgages harder to renew?
What credit score do I need for a B lender?
The Bottom Line
A lenders provide the best economics for qualified borrowers. If you can access A lending, use it. But don’t let A lender limitations stop you from building your portfolio.
B lenders serve a valuable role for investors who need flexibility, are rebuilding credit, or have outgrown A lender capacity. The key is treating B lending as a strategic choice—understanding the costs, confirming the deal justifies those costs, and planning your path to better financing when possible.
Smart investors use every financing tool available. Sometimes the best tool costs more.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Consult a licensed mortgage professional before making any financing decisions.
Written by
LendCity
Published
January 30, 2026
Reading time
6 min read
A Lender
A major bank or institutional lender offering the most competitive mortgage rates and terms but with the strictest qualification criteria, including full income verification and stress test compliance. Most investors use A lenders for their first four to six properties.
B Lender
Alternative lenders that serve borrowers who don't qualify with major banks, offering slightly higher rates with more flexible criteria.
Debt Service Ratio
A broad term for ratios measuring a borrower's ability to service debt. In Canadian residential lending, the key ratios are GDS and TDS. In commercial lending, the DSCR serves a similar function but focuses on property income rather than personal income.
Mortgage Stress Test
A federal requirement to qualify at the higher of your contract rate +2% or the benchmark rate (around 5.25%). For investors, rental income can be used to offset this calculation, though lenders typically only count 50-80% of expected rent.
Mortgage Term
The length of time your mortgage contract and interest rate are in effect. Typically ranges from 1 to 5 years in Canada, after which you renew or refinance.
CMHC Insurance
Mortgage default insurance from Canada Mortgage and Housing Corporation. For 1-4 unit investment properties, investors must put 20%+ down (no insurance available). However, CMHC offers MLI Select for 5+ unit multifamily properties, and house hackers can access insured mortgages with 5-10% down.
Bridge Financing
Short-term financing (90 days to 1 year) that covers the gap between purchasing a new property and selling or refinancing another. Investors use bridge loans to act quickly on deals or fund renovations before long-term financing is in place.
Private Mortgage
A mortgage from a private lender rather than a traditional bank, typically with higher rates but more flexible qualification requirements.
BRRRR
Buy, Rehab, Rent, Refinance, Repeat - a real estate investment strategy where you purchase a property below market value, renovate it to increase value, rent it out, refinance to pull out your initial investment, and repeat the process with the recovered capital.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
Joint Venture
A partnership between two or more parties to invest in real estate, combining capital, expertise, or credit to complete a deal.
Refinance
Replacing an existing mortgage with a new one, typically to access equity, get a better rate, or change terms. Investors commonly refinance to pull out capital for purchasing additional properties (cash-out refinance) while retaining ownership of the original property.
Credit Score
A numerical rating (300-900 in Canada) that represents your creditworthiness, affecting mortgage rates and approval. 680+ is typically needed for best rates.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
Mortgage Broker
A licensed professional who shops multiple lenders to find the best mortgage rates and terms for borrowers. Unlike banks, brokers have access to dozens of lending options.
Rental Income
Revenue generated from tenants paying rent on an investment property. Gross rental income is the total collected before expenses, while net rental income subtracts operating costs to show actual profitability.
Monoline Lender
A financial institution that exclusively originates mortgage loans without offering other banking products. Monoline lenders often provide competitive rates and more flexible investor policies than big banks, accessed through mortgage brokers.
Mixed-Use Property
A building that combines residential and commercial uses, such as retail on the ground floor with apartments above. Mixed-use properties can diversify income streams and may qualify for commercial financing terms.
Hover over terms to see definitions. View the full glossary for all terms.