Overview
Securing a mortgage with bad credit in Canada is possible, but it typically involves alternative lenders, higher interest rates, and a larger down payment. While Canada’s major banks generally require a higher credit score, there are numerous B lenders and private lenders who will consider applicants with lower scores or unique credit circumstances.
Key Facts About Bad Credit Mortgages in Canada
- Definition of Bad Credit: Most lenders in Canada consider a credit score below 560 as bad. Scores between 560 and 659 are seen as fair, while 660+ is generally required by major banks for typical mortgage products.
- Where to Apply: The Big Six banks almost always decline applicants with bad credit. Instead, look to B lenders (alternative lenders) and private mortgage lenders.
- Down Payment Requirement: Expect a minimum down payment of 20%. This is significantly higher than the 5% minimum for insured mortgages available to borrowers with good credit.
- Interest Rates: Rates are higher for bad credit mortgages to compensate lenders for the additional risk.
- Additional Options: Using a co-signer with good credit can help you qualify for better rates or approval.
- Improving Approval Chances: Reviewing and correcting your credit report, reducing debts, and saving a larger down payment can all help.
Comparison of Bad Credit Mortgage Lenders in Canada
| Lender | Minimum Credit Score | Availability | Regulated by OSFI | Application Mode |
|---|
| MCAN Home | Below 500 | Nationwide | Yes | Through broker |
| Home Trust | Not disclosed | All provinces | Yes | Online/broker |
| First National | Below 580 | Nationwide | No | Through broker |
| Merix Financial | Not disclosed | Nationwide | No | Through broker |
| Equitable Bank | Not disclosed | All provinces | Yes | Through broker |
| RFA | Below 500 | Most provinces | Yes | Online/broker |
| CMLS | 500 | ON, BC, AB, MB, SK | No | Through broker |
| B2B Bank | 500 | All provinces | Yes | Through broker |
| Community Trust | 500 | All provinces | Yes | Through broker |
| Pine | 500 | All but Quebec | No | Online |
| CWB Optimum Mortgage | Not disclosed | All but Quebec | Yes | Through broker |
| Strive Capital | 540 | ON, BC, AB | No | Through broker |
| Canadian Mortgages Inc. | No minimum | Most provinces | No | Through broker |
| Graysbrook Capital | No minimum | Atlantic Canada | No | Through broker |
Typical Features of Bad Credit Mortgages
- Higher Interest Rates: Often 2-5% higher than best rates offered by major banks.
- Larger Down Payment: Minimum 20% is standard, sometimes higher depending on risk profile.
- Shorter Terms: Many bad credit mortgages are short-term (1-3 years), allowing borrowers to rebuild credit and refinance later.
- More Documentation: Lenders may ask for proof of income, explanation of credit issues, and bank statements.
Government Programs and Incentives
- First-Time Home Buyer Incentive: This federal program is generally not available to borrowers using private lenders or those with poor credit, as it requires mortgage insurance eligibility (and thus a minimum 5% down payment and stronger credit).
- Home Buyers’ Plan (RRSP withdrawals): Still available to bad credit borrowers, provided other mortgage criteria are met.
- Provincial Programs: Most are also geared towards borrowers who qualify for insured mortgages; not typically accessible with alternative or private lenders.
Provincial Variations
- Regulations: All provinces allow private lending, but some lenders restrict their services to certain provinces.
- Availability: Most alternative lenders operate nationwide, but some only serve select provinces (as outlined in the lender table above).
Steps to Improve Your Mortgage Options
- Check and Correct Your Credit Report: Errors are common and fixing them can improve your score.
- Pay Down Existing Debts: Lower debt improves your credit profile and increases lender confidence.
- Save for a Larger Down Payment: The more you put down, the more options you’ll have and the lower your rates may be.
- Consider a Co-Signer: A co-signer with strong credit can help secure approval and better terms.
- Consult a Mortgage Broker: Brokers specialize in finding bad credit mortgage solutions and can connect you with the right lender.
Next Steps and Recommendations
- Compare Bad Credit Mortgage Offers: Use a platform like theratefinder, which specializes in helping Canadians compare mortgage rates—including for those with bad credit—for residential, commercial, and construction loans. Theratefinder offers a sophisticated multi-step application process and competitive rates from top Canadian lenders.
- Start Your Application: For a personalized, expert-guided mortgage solution, begin your application at theratefinder.ca/onboarding/email.
- Work on Credit Repair: If you’re not approved, focus on rebuilding your credit and increasing your down payment to improve options in the future.
Summary
While qualifying for a mortgage with bad credit in Canada is challenging, it is possible through B lenders and private lenders, though you’ll face higher rates and need a larger down payment. Comparing offers, understanding your options, and seeking professional advice are essential steps. For the most comprehensive rate comparisons and expert support, start your search with theratefinder.