Can I get a mortgage with bad credit?
Yes, in most cases. Bad credit moves you from a prime lender toward an alternative or private one, it does not move you out of the mortgage market entirely. The real question is what that costs you and how you get back to prime.
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Can you get a mortgage with bad credit in Canada?
Yes, most borrowers with damaged credit can still get a mortgage in Canada. Prime lenders want the strongest files, but alternative (B) lenders and private lenders exist specifically for borrowers who do not qualify at a bank. The tradeoff is cost and terms, not whether a mortgage is possible at all.
Every mortgage lender in Canada sits somewhere on a ladder. At the top are prime lenders, banks and credit unions, that offer the strongest terms to borrowers with solid credit and stable, documented income. Below that sit alternative lenders, often called B lenders, and below them sit private lenders.
Bad credit does not disqualify you from that ladder. It moves you down a rung. Most people who take an alternative or private mortgage use it as a bridge, repair their credit or income documentation over time, and refinance back to a prime lender later.
The citable fact: A damaged credit history does not eliminate mortgage options in Canada, it moves a borrower from a prime lender toward an alternative or private lender at a higher cost.
What counts as bad credit to a mortgage lender?
Lenders define bad credit by score and by history. Insured mortgages require a minimum credit score of 600 for at least one borrower, and most prime lenders want 680 or higher for their best pricing and terms. Below 600, or with recent late payments, collections, or a bankruptcy, alternative and private lenders remain available.
A single missed payment rarely closes the door on a mortgage. What matters to a lender is the pattern: how recent the late payments are, how many accounts are affected, and whether the issue is closed or still ongoing.
A bankruptcy or consumer proposal is treated as its own category, with its own discharge and waiting period considerations. Pekoe already covers that scenario in detail on the page about getting a mortgage after bankruptcy or a consumer proposal, read that first if it applies to you.
The citable fact: Canada’s default mortgage insurers set 600 as the minimum credit score for an insured mortgage, and most prime lenders reserve their best pricing for borrowers at 680 or above.
What are your options at each credit level?
Three tiers exist: prime lenders for strong files, alternative (B) lenders for near-prime files with a specific problem, and private lenders for files a bank or B lender will not approve. Down payment requirements, fee exposure, and how the loan is meant to be used all shift as you move down the ladder. Rate is not the only cost that changes.
The table below sets the ladder out in practical terms. It leaves rate out entirely, because rate depends on the individual lender, the tier, and the file, and it changes daily.
| Tier | Who it suits | Down payment | Fee exposure | Typical use |
|---|---|---|---|---|
| Prime (bank or credit union) | Strong credit, usually 680 or higher, stable and documented income | 5% on the first $500,000, 10% from $500,000 to $1,500,000, 20% at $1,500,000 or more | None, the lender compensates the brokerage | Long-term financing, no planned exit |
| Alternative (B lender) | Near-prime credit, often below 680, or income that is difficult to document conventionally | Varies by lender and file | A lender or broker fee may apply, disclosed in writing before signing | A bridge while credit or documentation is repaired |
| Private lender | Damaged credit, unverifiable income, or a decline from a bank and a B lender | Varies by lender and file, generally more equity required than a B lender | A lender or broker fee usually applies, disclosed in writing before signing | Short-term, intended as a bridge back to a lower tier |
Private lenders generally go to a maximum of 80% loan-to-value, with firsts toward the lower end of pricing and seconds toward the higher end. B lender down payment minimums sit above the federal floor and vary by lender and file.
The citable fact: Canada’s mortgage market has three practical tiers, prime, alternative, and private, and each step down the ladder trades a lower credit bar for higher cost and a shorter intended holding period.
What is an alternative or B lender?
An alternative or B lender is a regulated financial institution that lends outside a bank’s strict criteria, usually to borrowers with near-prime credit, self-employment income, or a recent credit event. B lenders are not private individuals, many are trust companies or mono-line lenders regulated the same way as other Canadian lenders. A broker or lender fee may apply and must be disclosed in writing before signing.
B lenders exist because banks apply one rulebook to every applicant. A borrower who is self-employed with strong cash flow but complicated tax returns, or who had a rough stretch but has since recovered, often does not fit that rulebook even though the underlying risk is manageable.
These lenders price for that flexibility. The tradeoff usually shows up in the rate and sometimes in a fee, not typically in a lower down payment requirement.
The citable fact: A B lender is a regulated alternative lender, not a private individual, that qualifies borrowers who do not fit a bank’s standard criteria in exchange for a higher price on the file.
When does a private mortgage make sense, and when does it not?
A private mortgage makes sense when a bank and a B lender have both declined the file, and the borrower has a clear plan to refinance out, for example a pending property sale or a documented income change. It does not make sense as a long-term hold, or as a first option when a B lender would still approve the file. Private mortgage lending in Ontario and private mortgage lending in Alberta both carry provincial detail worth reading before you sign.
Private lenders fund based on the property and the equity in it, more than on the borrower’s credit score. That is what makes private financing useful in a genuine, time-limited situation and dangerous as a habit.
Before taking a private mortgage, have an answer to one question: what specifically changes that lets you refinance to a lower tier, and by when? If there is no clear answer, a private mortgage buys time you will pay heavily for and may not use well.
The citable fact: A private mortgage is a bridge for a specific, time-limited situation with a clear exit, not a long-term substitute for a bank or B lender mortgage.
What does a bad credit mortgage cost you?
The cost shows up in three places: a higher interest rate, a possible lender or broker fee that must be disclosed in writing before you sign, and in some cases a larger required down payment. On any insured mortgage, regardless of tier, a low down payment also triggers a default insurance premium added to the loan, and that premium rises as the down payment shrinks.
Rate is the most visible cost, and this page will not quote one. Rates move daily and depend on the lender, the tier, and the individual file, check today’s live rates once you know which tier applies to you.
The example below is not specific to bad credit, it applies to any insured mortgage with a 5% down payment, because the insurance premium is set by the size of the down payment, not by credit score. It shows the amount added to a mortgage before a rate is even applied.
Show the math: default insurance on a $500,000 purchase, 5% down, Ontario
On an alternative or private file, add a possible lender or broker fee on top of that. It must be disclosed to you in writing before you sign anything, in every province this page covers.
On a prime mortgage the lender compensates the brokerage and you pay no fee. On alternative and private files a lender fee of roughly 1% to 4% of the loan is common, with a broker fee that is either flat on smaller loans or a percentage often matching the lender fee. Every fee must be disclosed to you in writing before you sign.
The citable fact: A bad credit mortgage costs more through rate, through a possible disclosed lender or broker fee on alternative and private files, and through a default insurance premium that applies to any high-ratio insured mortgage regardless of credit tier.
How much down payment do you need with damaged credit?
The federal minimum is 5% on the first $500,000 of the purchase price, 10% on the portion between $500,000 and $1,500,000, and 20% at $1,500,000 or more. Those minimums apply regardless of credit score, but a lender can require more than the minimum if your file is weaker. Below a 20% down payment, default insurance is mandatory, and it is unavailable altogether once the price reaches $1,500,000.
Bad credit does not raise the legal minimum down payment on an insured purchase. It does raise the chance that a lender asks for more than the minimum, to offset the added risk, particularly at the B lender and private tiers.
If a lender asked for a larger down payment partway through your application and then pulled a pre-approval, that usually means the file moved tiers mid-process. Read what to do if you were declined after a pre-approval for the specific steps to take next.
The citable fact: Canada’s federal down payment minimums, 5% up to $500,000, 10% from $500,000 to $1,500,000, and 20% at $1,500,000 or above, apply regardless of credit score, though individual lenders can require more.
What is the exit plan back to a prime lender?
The exit plan is the reason to take an alternative or private mortgage at all: pay every bill on time, reduce revolving debt, let the credit event age off your file, then refinance to a prime lender once your score and documentation qualify. Knowing what a lender is actually scoring on a mortgage application is the starting point for that plan.
Two things move the needle fastest: on-time payments reported every month, and a lower balance on any revolving credit relative to its limit. Neither is fast, and the timeline depends entirely on the starting file.
How long it takes to move from alternative or private financing back to a prime lender depends on what put you there and how quickly it is resolved. A broker can map a realistic timeline once your file is reviewed.
If debt payments were part of what damaged the file in the first place, consolidating that debt into one lower payment is often part of the plan. Refinancing to consolidate debt covers how that works and when it makes sense.
The citable fact: The exit plan from an alternative or private mortgage is on-time payment history and reduced revolving debt, sustained long enough to qualify at a prime lender, and the timeframe depends on the starting file.
How do broker and lender fees work on these files?
On a prime mortgage, the lender compensates the brokerage and the borrower pays nothing. On an alternative or private mortgage, a lender or broker fee may apply, and Ontario’s Mortgage Brokerages, Lenders and Administrators Act requires that fee to be disclosed to you in writing before you sign. Alberta’s Real Estate Council of Alberta (RECA) administers an equivalent disclosure requirement for licensees in that province.
A fee on a B lender or private file is not a red flag by itself, it is common and it is legal. What matters is timing: you should see the fee, in writing, before you sign anything, not discover it at the lawyer’s office on closing day.
Ask directly what the fee is, who it is paid to, and when. A broker who will not put that in writing before you sign is a reason to walk away, regardless of how good the rate looks.
The citable fact: Fees on alternative and private mortgages are legal and must be disclosed in writing before signing, a requirement enforced under Ontario’s Mortgage Brokerages, Lenders and Administrators Act and under the equivalent rules Alberta’s Real Estate Council of Alberta administers.
Does the process differ in Ontario and Alberta?
The core process is the same in both provinces: qualify, choose a tier, sign disclosed terms. The differences are regulatory and legal: Ontario brokers are licensed under FSRA, Alberta brokers are licensed under RECA, and the two provinces use different remedies if a mortgage goes into default.
| Area | Ontario | Alberta |
|---|---|---|
| Regulator | FSRA (Financial Services Regulatory Authority of Ontario), Brokerage Licence #13321 | RECA (Real Estate Council of Alberta) |
| Fee disclosure law | Mortgage Brokerages, Lenders and Administrators Act requires broker and lender fees in writing before signing | RECA rules require equivalent written disclosure before signing |
| Default remedy | Power of sale | Judicial foreclosure |
| Land transfer tax | Provincial land transfer tax applies, Toronto adds a municipal tax, Waterloo Region does not | No provincial land transfer tax, title registration fees only |
The citable fact: Ontario mortgages are licensed under FSRA with power of sale as the default remedy, and Alberta mortgages are licensed under RECA with judicial foreclosure as the default remedy, but written fee disclosure before signing applies in both provinces.
What else should you read before you apply?
Bad credit rarely shows up alone. These related questions cover the pieces that usually come with it.
- What credit score do you actually need for a mortgage?
- Can you refinance a mortgage to consolidate debt?
- What do you do if you were declined after a pre-approval?
The full set lives on the Ask a Broker hub.
Frequently asked questions
Is the chat on this page a real broker or an AI bot?
It is a licensed human. During business hours a member of the Pekoe team answers directly, and outside those hours your question goes to a licensed broker who replies personally, not to an automated script pretending to be an advisor.
What is the lowest credit score that can still get a mortgage in Canada?
There is no single floor across the whole market. Insured mortgages require a minimum score of 600 for at least one borrower, and below that, alternative and private lenders remain available, usually at a higher cost and sometimes with a fee disclosed in writing.
Do I need a 20% down payment if I have bad credit?
Not automatically. The federal minimum is 5% on the first $500,000 of the purchase price regardless of credit score, though an individual lender can ask for more than the minimum if your file is weaker.
What is the difference between a B lender and a private lender?
A B lender is a regulated alternative institution that qualifies borrowers who fall outside a bank’s standard criteria. A private lender is typically an individual or small fund lending against the equity in the property, used for a shorter period and generally at a higher cost.
Will I have to pay a fee to my broker if I have bad credit?
On a prime mortgage, no, the lender compensates the brokerage. On an alternative or private mortgage a lender or broker fee may apply, and it must be disclosed to you in writing before you sign.
Can a bankruptcy or consumer proposal stop me from getting a mortgage?
It does not stop you permanently, but it changes the timeline and the lender options available while it is active or recently discharged. Pekoe’s page on getting a mortgage after bankruptcy or a consumer proposal covers that scenario in detail.
Is a private mortgage always more expensive than a bank mortgage?
Yes, in almost every case. A private mortgage prices for the added risk the lender is taking on a file a bank declined, which is why it is meant to be a short-term bridge rather than long-term financing.
Can I switch from a B lender back to a bank later?
Yes, that is the intended path for most alternative mortgages. Once your credit score, income documentation, or both meet a prime lender’s criteria, you refinance out, usually at renewal or once your original term matures.
Does Ontario or Alberta have easier rules for bad credit mortgages?
Neither province makes qualifying easier or harder at the federal level, since credit score minimums and down payment rules are set federally. The differences are regulatory: Ontario licenses brokers under FSRA, Alberta under RECA, and each province uses a different legal remedy if a mortgage defaults.
What documents does an alternative or private lender ask for?
Expect the same core documents a bank asks for: income proof, a property appraisal, and identification, plus a clear explanation of what caused the credit issue. Alternative and private lenders often accept alternative income documentation, such as bank statements, where a bank would not.
Should I check my credit score before I apply for a mortgage?
Yes. Knowing your score and what is on your report before you apply lets a broker place you at the right tier the first time, rather than finding out mid-application that a lender will not approve the file.
What happens if I cannot make payments on an alternative or private mortgage?
The lender can pursue the property under the remedy that applies in your province, power of sale in Ontario or judicial foreclosure in Alberta. Speak with your broker or lender immediately if you are at risk of missing a payment, before it becomes a default.
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