B Lenders and Private Mortgages in BC: When a Bank Says No

If a bank or credit union turns down your mortgage, other lenders may say yes, but they cost more and carry more risk. Here is how B lenders and private mortgages work in BC, who uses them, what to check before you sign, and how to plan your way back to a mainstream lender.

The short version

A, B and private lenders

The labels describe where a lender sits in the market, and people use them loosely. In general:

• A lenders are the banks and credit unions most people deal with. Banks are federally regulated; credit unions are mostly regulated provincially, in BC by the BC Financial Services Authority (BCFSA). Their standard mortgages are for borrowers who can document their income, have good credit and keep their debts within set limits, on a home that meets the lender's standards.
• B lenders are regulated institutions, such as some trust companies and smaller banks, that lend to borrowers who don't fit typical lending criteria. One federally regulated trust company, for example, describes its alternative mortgage as being for exactly those borrowers, and lends up to 80% of the home's value.
• Private lenders include mortgage investment corporations, other private companies and individuals lending their own money. CMHC describes these lenders as providing short-term loans at higher interest rates to borrowers who don't qualify with traditional lenders.

Why people end up there

A bank's "no" usually comes down to one of these:

• Income that is hard to document. Lenders may ask self-employed borrowers for two years of Notices of Assessment, and large write-offs lower the income those show. The mortgage insurers have programs for the self-employed, including one from Sagen for owners who have been in business at least two years and can't provide traditional proof of income, with at least 10% down. I cover them in Self-Employed? How to Get a Mortgage in Canada.
• Credit problems, such as recent late payments, collections, a consumer proposal or a bankruptcy. Canada Guaranty, one of the mortgage insurers, considers a borrower only two years after a bankruptcy discharge, with two years of rebuilt credit.
• Debts that are too high for a lender's limits once you are qualified at the stress test rate.
• The property. Before approving a mortgage, lenders check that the home meets their standards, so a property that doesn't can be declined even if you qualify.

How the terms differ

I won't quote rates here, because they change often, but the pattern holds:

• Rates. More risk means a higher rate, so expect a B lender to charge more than a bank. CMHC describes the rates on mortgages from mortgage investment entities as high.
• Fees. Mortgage brokers are usually paid a commission by the lender and generally don't charge you, but some do, and lenders can charge fees of their own. Ask for every fee in writing before you commit.
• Shorter terms. CMHC says mortgages from mortgage investment entities often have terms of less than a year and interest-only payments, so the balance doesn't go down.
• How much you can borrow. Banks and federally regulated trust companies can't lend more than 80% of a home's value unless the mortgage is insured, so a B lender's alternative mortgage generally needs at least 20% down or 20% equity. Private lenders set their own limits.
• Prepayment. Some mortgages allow no prepayments at all, and leaving before the term ends can mean penalties and fees.

How it's regulated in BC

• Federally regulated lenders, including banks and federally regulated trust companies, follow federal underwriting guidelines and the stress test: for an uninsured mortgage, you qualify at the greater of your contract rate plus 2% or 5.25%. Lenders that aren't federally regulated, such as BC's provincially regulated credit unions, may ask you to pass a stress test too, and CMHC, for one, qualifies the borrowers it insures at that same rate whoever the lender is. Private lenders set their own tests.
• Disclosure. A federally regulated lender must give you an information box with your rate, annual percentage rate, prepayment privileges, penalties and other charges, and a renewal statement at least 21 days before your term ends. For a consumer mortgage, BC's consumer protection law also generally requires a cost of credit disclosure, from a lender in the business of lending or the broker who arranges it, at least 2 business days before you commit or pay anything, unless you waive that period.
• Mortgage brokers must be registered with BCFSA under BC's Mortgage Brokers Act until October 13, 2026, and licensed under the new Mortgage Services Act from that date. Until then, anyone who carries on a business of lending on mortgages, or lends on 10 or more mortgages in a year, must also register unless an exemption applies; from that date, a business of mortgage lending must be licensed instead. Before you work with a broker, look them up with BCFSA's Find a Mortgage Broker search.
• Conflicts of interest. A broker who, directly or through a related party, has an interest in your mortgage discloses it on a prescribed form.
• Broker fees. Under BC's consumer protection law, a broker can't charge you a fee for arranging a consumer mortgage unless it is deducted from the mortgage money when it funds. That rules out fees charged before funding, such as application or commitment fees, and cancellation fees if you don't go ahead.

The Mortgage Services Act replaces BC's Mortgage Brokers Act on October 13, 2026, with a new licensing and regulatory framework for the industry.

The risks

• Cost. Higher rates and fees add up, and fees taken from the mortgage money reduce what you receive.
• Renewal isn't guaranteed. At the end of a term, the lender doesn't have to renew, and the terms can change. On a short term, that question comes up quickly.
• No progress on the balance while you pay interest only.
• Losing the home. If you fall behind, or can't renew or refinance when the term ends, the lender has the legal right to recover what you owe, and that can lead to a forced sale of your home.
• Fewer safeguards. Mortgage investment entities aren't subject to the same prudential rules as banks, and the federal disclosure rules above apply only to federally regulated institutions.

Before you sign

• Get the total cost in writing: the rate, every fee and who receives it, and the appraisal and legal costs.
• Know the term and the payment. Is it interest-only, and what happens when the term ends?
• Ask about prepayment and penalties, including what it costs to leave early.
• Ask who the broker works for and how they are paid on this mortgage.
• Have a lawyer or notary review the documents with you before you sign.

Planning your exit

Treat a B or private mortgage as temporary, and work on whatever caused the "no" from the day you sign:

• Rebuild your credit. Pay every bill on time and keep card balances under 30% of your limits.
• Document your income. File your taxes on time and keep your Notices of Assessment.
• Pay down other debts to bring your ratios within a bank's limits.
• Build equity. If your mortgage allows prepayments, extra payments shrink what you will need to refinance.
• Start early. Begin shopping a few months before the term ends, and ask what it will cost to leave: any prepayment penalty and discharge fee, plus the new lender's setup, appraisal and legal costs.

Questions buyers often ask me

What is a B lender?

A regulated lender, such as some trust companies and smaller banks, that lends to borrowers who don't fit a bank's standard rules. Expect a higher rate than at a bank, and generally at least 20% down or 20% equity.

Are private mortgage lenders regulated in BC?

Partly. Until October 13, 2026, anyone who carries on a business of lending on mortgages, or lends on 10 or more mortgages a year, must register with BCFSA under the Mortgage Brokers Act unless exempt; from that date, a business of mortgage lending must be licensed under the Mortgage Services Act. Private lenders aren't subject to the prudential rules that apply to banks.

Can a mortgage broker charge me a fee in BC?

Brokers are usually paid by the lender, but some charge a fee. Under BC's consumer protection law, a fee for arranging a consumer mortgage can only be deducted from the mortgage money when it funds, not charged up front.

How long does a private mortgage last?

Often less than a year. CMHC says mortgages from mortgage investment entities often have terms of less than a year, interest-only payments and high interest rates.

How do I get back to a bank after a B or private mortgage?

Use the term to fix what caused the decline: rebuild your credit, document your income and pay down debt. Then start shopping a few months before the term ends, and weigh the cost of leaving against the savings.

Weighing your options? Read Self-Employed? How to Get a Mortgage in Canada, How Much House Can You Afford? and Renewing Your Mortgage.

This article is general information, not financial or legal advice. Before you sign a B or private mortgage, have a lawyer or notary review it with you. The rules and lender terms come from official and lender pages and were current at the time of writing. For BCFSA's guide, see mortgage brokers in BC.