A Word About ‘B’ Lenders

Last week I briefly described what we refer to as ‘A’ Lenders Again I remind you that the reference is not a direct reflection of the ‘quality’ of the lender, but refers to the type of mortgage financing they are able to provide.

In this case ‘B’ Lenders do not generally do high ratio mortgages, so you will require at least a 20% down payment.?There are a few examples of these lenders offering what is sometimes referred to as ‘Alt A’ insured products, but this is not the general rule.

Because of the nature of their business, and the fact that it is not specifically federally regulated, these lenders can take on somewhat riskier clients.?So they are a good option for self-employed, those with lower credit scores and folks who have had consumer proposals or other events which impair their ability to access traditional bank financing.

The largest ‘B’ Lenders in Canada are the Mortgage Finance Companies who were established to compete for, what were perceived as, higher risk clients.?The four largest, MCAP, First National, Merix and RFA, are reported to account for more than 10% of the Canadian mortgage market.

So what is the cost of being a “higher risk” borrower??Rates may be slightly higher with ‘B’ Lenders, but it today’s competitive market it’s a pretty even playing field. So the main “cost” you may incur is the 20%+ down payment.

The advantages you may see, however, are more flexible payment options and longer amortization.

So don’t be insulted if your Mortgage Agent recommends a ‘B’ Lender. Listen to the facts and make a rational decision.

Remember that this article reflects my personal opinion and does not necessarily reflect that of Mortgage Alliance.