Many people don’t know this but there are three different lending tiers in Canada. These tiers are: A Lenders, B Lenders, and Private Lenders. There are several factors that come into play for which tier you could qualify for. Ideally, everyone could qualify with an A Lender but that is not the case. Thankfully, there are other options for people who may be in a difficult financial situation.
In 2017, some Canadians have extremely high debt loads. People are facing problems with credit, income, or bankruptcy. For some clients, trying to get mortgage approval through a B Lender is there best option. With a B Lender, you still need a credit score but clients can qualify even with poor credit or an unstable income.
B Lending institutions typically require a higher down payment, have higher mortgage rates, and there are more fees. Where an A Lender requires a minimum of 5% down on a purchase or refinance, a B Lender will usually require 20% to qualify. On the plus side, B Lenders have no insurance premiums because they are self-insured.
When a client is approved for a mortgage with a B Lender, it is usually a 1-3-year fixed term. This is because it is meant to be short-term. It gives the client a chance to rebuild their credit and financial situation in the hopes that they can be approved with an A Lender in the future.
When comparing a B side mortgage with a rate around 3.50%-5.00% it is often cheaper than the revolving debt payments on large lines of credit or credit cards closer to the 19.99%.
Interested in chatting? Click the contact button above!