Overview
Securing a mortgage with adverse (bad) credit in Canada is possible, but it comes with stricter requirements and higher costs. While major banks may have tight lending standards, there are specialized lenders and programs designed for Canadians with poor credit histories or previous financial challenges.
How Bad Credit Impacts Mortgage Approval
- Lower credit scores mean you are viewed as a higher-risk borrower. This results in:
- Higher interest rates
- Larger required down payments
- Stricter qualification criteria
- Major banks and federally regulated lenders often require stronger credit, but alternative (B-lenders) and private lenders are more flexible, though at a cost.
- Previous bankruptcies or consumer proposals can make mortgage approval harder, with many lenders requiring a waiting period (typically two years post-discharge) and evidence of re-established credit.
Options for Canadians with Bad Credit
Types of Lenders
| Lender Type | Credit Score Requirement | Provinces Available | Application Method | Notes |
|---|
| Big Six Banks | 600+ | Nationwide | Direct or broker | Strict, best rates for strong credit only |
| B-Lenders | 500–600 | Nationwide & regionally | Must use mortgage broker | More flexible, higher rates/fees |
| Private Lenders | No minimum, <500 ok | All provinces (varies) | Broker or online | Highest rates, flexible, large down payment |
- Alternative and private lenders specialize in bad credit situations, but typically require:
- Minimum credit score of 500 (some will go lower)
- Down payment of 20% or more
- Proof of stable income
Typical Mortgage Terms for Bad Credit
- Interest rates: Usually 2–5% higher than prime rates
- Down payment: Minimum 20%, sometimes higher
- Fees: You may face lender, broker, or administrative fees
- Short-term solutions: Many bad credit mortgages are for 1–3 years, allowing borrowers to rebuild credit and refinance to better rates later
Specialized Programs
- Some lenders offer bruised credit programs, considering applicants with recent bankruptcies, consumer proposals, or even multiple negative credit events on a case-by-case basis.
- Home equity lines of credit or combined purchase/HELOC products may also be available for those with significant equity.
Provincial Considerations
- Mortgage regulations and consumer protections may vary by province. For instance, the process for credit checks or required consent differs in Nova Scotia, PEI, and Saskatchewan versus other provinces.
- Some lenders only operate in certain provinces.
How to Improve Approval Chances
- Check your credit report for errors before applying; correcting mistakes can boost your score.
- Prepare a larger down payment; this reduces lender risk.
- Demonstrate steady income and low debt-to-income ratio.
- Work with a mortgage broker specializing in adverse credit—they have access to a wider range of lenders and can guide you to the best solution.
- Consider credit repair or counseling if you have time before buying.
Government Programs and Support
- If you’re experiencing financial stress as a homeowner, the Financial Consumer Agency of Canada (FCAC) expects federally regulated lenders to offer relief measures, such as extending amortization or waiving fees, for borrowers at risk of default due to exceptional circumstances.
- First-time homebuyer programs and insured mortgages are harder to access with bad credit, as mortgage insurers (CMHC, Sagen, Canada Guaranty) typically require a minimum credit score of 600.
Rate Comparison
| Borrower Type | Typical Rate (2025) | Minimum Down Payment | Lender Type |
|---|
| Good Credit | 4.5–5.5% | 5–20% | Major banks |
| Bad Credit (500–600) | 7.5–10%+ | 20%+ | B/Private lenders |
Actual rates vary by province, lender, and borrower profile. Always compare with a trusted platform.
Actionable Next Steps
- Compare rates and lenders: Use a comprehensive platform like theratefinder to compare mortgage rates for all credit situations, including residential, commercial, and construction loans. Their multi-step application process matches you with competitive rates from top Canadian lenders.
- Start your application: For a personalized mortgage solution, begin your application at theratefinder.ca/onboarding.
- Consult a specialist: Engage a mortgage broker with experience in adverse credit. They can help you navigate lender options and improve your approval odds.
Summary
While getting a mortgage with adverse credit in Canada is challenging, it is achievable through alternative lenders, larger down payments, and careful preparation. Interest rates and fees are higher, but these solutions can be stepping stones to better financing in the future. Always compare your options and seek expert guidance to secure the best possible terms for your situation.