A Lender vs B Lender: Which Is Right for Your Next Investment Deal?

Compare A lenders and B lenders for investment property financing in Canada. Understand rates, qualification, and when paying more makes strategic sense.

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A Lender vs B Lender: Which Is Right for Your Next Investment Deal?

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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.

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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.

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?

Private lending opens doors that traditional banks won’t — book a free strategy call with LendCity to find out what private and alternative financing options are available to you.

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 eventually exhaust A lender capacity. 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?

When the banks say no, private lenders often say yes — schedule a free strategy session with us and we’ll walk you through the costs, terms, and trade-offs.

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. 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.

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Frequently Asked Questions

Can I have mortgages with both A and B lenders simultaneously?

Yes. Many portfolio investors have A lender mortgages on their first several properties and B lender mortgages on subsequent ones acquired after reaching A lender limits. This mixed approach optimizes financing costs across the portfolio.

How do I move from B lending to A lending?

At renewal or refinancing time, have your broker submit your application to A lenders. If your credit has improved, income documentation has strengthened, or your situation has changed, you may qualify. Plan your B-to-A transition from the start.

Do B lenders report to credit bureaus?

Most B lenders report to credit bureaus, which means on-time payments build your credit history. This reporting can help you qualify for A lending in the future. Confirm reporting practices with your specific lender.

Are B lender mortgages harder to renew?

Renewal processes vary by lender. Some B lenders offer straightforward renewals; others reassess your situation at renewal. Understanding renewal terms before signing helps avoid surprises. Use renewal as an opportunity to explore A lender options.

What credit score do I need for a B lender?

B lender minimums vary but typically start around 550-600. Some accept lower scores with compensating factors like larger down payments or strong income. Credit score requirements are more flexible than A lenders but not absent entirely.

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: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.

Written by

LendCity

Published

January 30, 2026

Reading Time

6 min read