Overview
Getting a mortgage in Canada with bad credit is challenging but possible. Traditional lenders—especially the Big 6 banks—typically require a credit score of 680 or higher for approval. However, alternative lenders (often called B lenders or private lenders) offer solutions for those with lower scores, sometimes as low as 500 or even below. These mortgages come with higher interest rates, stricter terms, and larger down payment requirements, but they provide a pathway to homeownership for those with imperfect credit histories.
Current Canadian Mortgage Rates and Market Conditions
- Traditional Mortgages: Prime rates for well-qualified borrowers (credit score 700+) hover around 5–7% (as of mid-2025), depending on term and type (fixed vs. variable).
- Bad Credit Mortgages: Rates for borrowers with scores below 680 can be significantly higher—often 7–12% or more—reflecting the increased risk to the lender.
- Market Trends: Lenders have tightened criteria due to economic volatility, making it harder for those with poor credit to qualify, especially outside major urban centers.
- Down Payments: For bad credit, expect to put down at least 20% (sometimes 25% for condos), compared to 5% for those with good credit.
Canadian Government Programs and Incentives
- First-Time Home Buyer Incentive: A shared equity mortgage where the government contributes 5% (existing home) or 10% (new build) toward the down payment, reducing monthly costs. Not specific to bad credit, but available to all qualified first-time buyers.
- Home Buyers’ Plan (HBP): Allows first-time buyers to withdraw up to $35,000 from their RRSPs tax-free for a down payment.
- Tax Credits: First-time buyers may qualify for land transfer tax rebates in certain provinces (e.g., Ontario, British Columbia).
- Program Limitations: Most government programs assume at least moderate creditworthiness; those with very low scores may not qualify.
Major Canadian Bank Offerings
| Lender Type | Minimum Credit Score | Down Payment | Availability | Notes |
|---|
| Big 6 Banks | ~680 | 5–20% | Nationwide | Rarely approve bad credit applicants |
| B Lenders | 500–580 | 20%+ | Nationwide (varies) | Higher rates, stricter terms |
| Private Lenders | 500 or lower | 20%+ | Nationwide (varies) | Highest rates, flexible criteria |
- Big 6 Banks: Scotiabank, RBC, TD, BMO, CIBC, and National Bank generally do not offer mortgages to those with credit scores below 680.
- B Lenders & Private Lenders: These include credit unions, mortgage finance companies, and private institutions. They specialize in higher-risk borrowers but charge accordingly.
- Mortgage Brokers: Essential for bad credit mortgages, as they have access to a wide network of alternative lenders and can negotiate terms on your behalf.
Provincial Variations in Regulations
- Quebec: Some lenders do not operate in Quebec, and the province has unique consumer protection laws affecting mortgage terms.
- Ontario, British Columbia, Alberta: More options for alternative lending, but regulations on mortgage brokers and lenders vary.
- Atlantic Provinces (e.g., Nova Scotia): Local brokers (e.g., Alex Lavender) highlight that while big banks are restrictive, many alternative lenders serve these markets.
- Down Payment Requirements: Federal rules set minimums, but provinces may have additional programs or incentives for first-time buyers.
First-Time Homebuyer Programs Specific to Canada
- First-Time Home Buyer Incentive: Shared equity program to reduce monthly payments.
- Home Buyers’ Plan (HBP): RRSP withdrawal for down payment.
- Land Transfer Tax Rebates: Available in some provinces for first-time buyers.
- Provincial Programs: Some provinces offer additional grants or tax credits (e.g., BC First Time Home Buyers’ Program, Ontario Land Transfer Tax Refund).
Note: These programs generally require at least moderate credit. Those with very poor credit may need to improve their score before qualifying.
Actionable Steps for Applicants with Bad Credit
- Check Your Credit Report: Obtain your credit report from Equifax or TransUnion. Dispute any errors and work on improving your score.
- Save a Larger Down Payment: Aim for at least 20% to improve your chances and secure better terms.
- Demonstrate Stable Income: Lenders will scrutinize your employment history and income stability.
- Consult a Mortgage Broker: Brokers have access to B lenders and private lenders who specialize in bad credit mortgages. They can compare multiple offers and advocate for you.
- Consider Credit Repair: If time allows, take steps to repair your credit (pay bills on time, reduce debt, avoid new credit applications) before applying.
- Explore Alternative Verification: Some lenders may consider alternative credit history, especially for newcomers or those with limited Canadian credit.
- Compare Rates and Terms: Use platforms like theratefinder to compare mortgage rates from top Canadian lenders, including those specializing in bad credit. Begin your application at theratefinder.ca/onboarding for a personalized solution.
Summary
While bad credit makes obtaining a mortgage more difficult and expensive in Canada, numerous alternative lenders and specialized brokers can help. Expect higher interest rates, larger down payments, and stricter terms, but homeownership remains within reach with the right preparation and professional guidance. Start by assessing your credit, saving for a substantial down payment, and consulting a mortgage broker with access to B and private lenders. For the most competitive rates and a streamlined application process, consider starting your search at theratefinder.ca/onboarding, where you can compare offers from Canada’s leading lenders and find a solution tailored to your unique financial situation.