Alternative vs. Private Mortgage Lenders: What’s the Difference?
December 1, 2025 | Posted by: Sherry Corbitt
If you’re exploring mortgage options and come across the term Alternative lender, you might wonder what that means. In Canada, lenders generally fall into three levels based on credit, equity, income stability, and existing debt. If you don’t currently qualify for a traditional bank mortgage, you may be offered a solution through an Alternative lender or a Private (MIC) lender.
Understanding the difference between these two options can help you choose the mortgage that best fits your financial situation and long-term goals.
What Is an Alternative Mortgage Lender?
An Alternative mortgage lender (also known as a B-lender) provides solutions for borrowers who fall just outside traditional bank guidelines. These lenders still assess your ability to repay the mortgage using your GDS and TDS ratios:
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Gross Debt Service (GDS): Mortgage payments, property taxes, and heating costs
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Total Debt Service (TDS): GDS plus all other monthly debts such as car loans, credit cards, and personal loans
Alternative lenders look closely at income, employment stability, and overall cash flow. However, they are more flexible with non-traditional income sources such as:
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Child Tax Credit
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Recently established child or spousal support
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Income from another adult in the household (contributor income)
These lenders are also conservative when it comes to Loan-to-Value (LTV) and rarely lend above 80% LTV. For example, if your home is worth $500,000, the maximum mortgage amount would typically be $400,000.
Typical Alternative Mortgage Costs
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Rates: 4–6%
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Lender fees: 1–2% of the mortgage balance
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Additional costs: Appraisal and legal fees (approximately $1,500)
Alternative lenders can work with borrowers who have property tax arrears or income tax debt. They may also help clients in consumer proposal or bankruptcy if the mortgage will consolidate and pay out those debts.
What Is a Private Mortgage or MIC Lender?
A Private lender or Mortgage Investment Corporation (MIC) focuses primarily on equity, making this a common option for borrowers with:
- Bad credit
- Unstable income
- High debt levels
- Urgent refinancing needs
These lenders often do not require income documents or proof of paid income taxes. Their risk tolerance is much higher than banks or Alternative lenders.
Most private lenders cap loans at 80–90% LTV, with the majority preferring the lower end.
Typical Private Mortgage Costs
- Rates: Starting around 6.50% and increasing based on risk and property
- Fees: 3–5%
- Legal fees: You pay both your lawyer and theirs (typically $1,100–$2,000)
- Appraisal: Always required
Private mortgages come with short-term commitments- generally 6 months to 2 years. This type of lender is meant to be a temporary solution, helping you rebuild credit, refinance debts, or stabilize your financial situation before transitioning into an Alternative or traditional lender.
Why Lenders Need Your Story
Both Alternative and Private lenders want to understand:
- What caused the financial challenge? (Job loss, illness, divorce, hardship, temporary setback)
- What is your exit strategy?
- How will the lender be paid back?
Examples of exit strategies include
- Selling the property
- Improving credit
- Increasing income or securing stable employment
- Paying off high-interest debt
Your story, combined with equity and income potential, helps lenders determine the best mortgage product for your situation.
How Our Team Supports You
Our role is to:
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Assess the true value and condition of your property
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Understand your financial situation and the reason you need a non-bank mortgage
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Build a clear exit strategy to move you toward better borrowing options
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Match you with the lender- Alternative or Private that aligns with your current needs and long-term financial goals
Whether you're rebuilding credit, navigating a major life change, or simply need a short-term solution, we help you find the right mortgage pathway.
Your Mortgage Broker For Life,
Sherry Corbitt
