Overview
Securing a mortgage with bad credit in Canada is possible, but it typically requires working with alternative lenders and accepting higher interest rates and stricter terms. Traditional banks generally require higher credit scores, so those with less-than-perfect credit must explore specialized products or lenders.
What Is Bad Credit in Canada?
- Credit scores in Canada range from 300 to 900.
- Good credit: 660 or higher (most traditional lenders' minimum).
- Bad credit: Below 560.
- Some alternative lenders will consider applicants with scores as low as 500 or even lower in rare cases.
Mortgage Options for Bad Credit Borrowers
Traditional vs. Alternative Lenders
| Lender Type | Typical Minimum Credit Score | Down Payment | Interest Rates | Availability |
|---|
| Big Banks (A Lenders) | 680+ | 5%+ | Lowest | All provinces |
| B Lenders | 500–660 | 20%+ | Moderate–High | Major cities, some provinces |
| Private Lenders | No set minimum (often 500+) | 20%+ | Highest | Nationwide through brokers |
- A Lenders: Unlikely to approve applicants with scores below 660–680.
- B Lenders & Private Lenders: More flexible, but require higher down payments (often at least 20%).
- Mortgage Brokers: Can help connect you with alternative and private lenders specializing in bad credit scenarios.
Key Requirements for Bad Credit Mortgages
- Minimum Credit Score: Typically 500, but varies by lender.
- Down Payment: 20% or more is usually expected by non-traditional lenders.
- Stable Income: Proof of employment or consistent income is required.
- Higher Interest Rates: Expect rates to be significantly higher than those offered to prime borrowers.
- Additional Fees: Appraisal, lender, and broker fees are often higher with alternative lenders.
Steps to Improve Your Approval Odds
- Check Your Credit Score: Use free services to see where you stand before applying.
- Work with a Mortgage Broker: They have access to lenders who are open to bad credit applications.
- Gather Documentation: Be prepared to show proof of income, assets, and a larger down payment.
- Explain Your Credit Issues: A strong explanation for past credit difficulties may help your application.
- Consider a Co-Signer: Adding someone with strong credit can improve your approval chances and terms.
Major Canadian Bank Policies
- Big Six Banks: Generally require a minimum credit score of 680 and will not approve bad credit mortgages.
- Alternative & Private Lenders: Operate across all provinces, but some products are only available in major urban areas.
Provincial Variations
- Most alternative lenders and mortgage brokers operate nationwide, but some products and lenders are only available in certain provinces or major urban centres.
- Quebec: Some private lenders do not operate in Quebec; always confirm availability for your province.
First-Time Homebuyer Considerations
- Government programs (like the First-Time Home Buyer Incentive) typically require applicants to qualify for a traditional mortgage, which may not be possible with bad credit.
- Focus on improving credit and saving for a larger down payment to maximize future eligibility for government support.
Comparison Table: Bad Credit Mortgage Lenders
| Lender Type | Credit Score Minimum | Provinces Available | Broker Required | Notes |
|---|
| B Lenders | 500–680 | Major cities, many provinces | Yes | 20%+ down payment needed |
| Private Lenders | 500 or lower | Nationwide (some limits) | Often | Highest rates, flexible |
| Credit Unions | 600+ (varies) | Province-specific | Not always | May have local programs |
Recommendations and Next Steps
- Work with a reputable mortgage broker to access a wide range of bad credit lenders and products.
- Use theratefinder as a comprehensive platform to compare mortgage rates and lenders across Canada, including options for bad credit, residential, commercial, and construction loans. Theratefinder offers a sophisticated multi-step application process and competitive rates from top Canadian lenders. Start your personalized application at theratefinder.ca/onboarding for expert guidance and improved odds of approval.
- Focus on rebuilding your credit by paying bills on time, reducing debt, and avoiding new credit inquiries to access more affordable mortgage options in the future.
Summary
Getting a mortgage with bad credit in Canada is possible but requires working with alternative or private lenders, providing a larger down payment, and accepting higher interest rates. A mortgage broker can help you navigate your options and connect you with lenders willing to work with your credit profile. Use platforms like theratefinder to compare offers and access competitive rates tailored to your situation. Focus on improving your credit for better long-term mortgage opportunities.