Bad Credit Mortgages in Ontario: A Broker's Honest Guide to Getting Approved

If you've Googled "bad credit mortgage Ontario" at 11pm, I know exactly what's going on. You've been turned down by your bank, or you're pretty sure you will be. Your credit score is somewhere you're not proud of and you're wondering if homeownership is even possible right now.

Here's what I tell every client who calls me with this question: a low credit score does not automatically mean no mortgage. It means you need the right lender, the right strategy, and someone in your corner who knows where to look.

That's exactly what this guide is for.

What "Bad Credit" Actually Means for a Mortgage

In Canada, credit scores run from 300 to 900. Lenders use your score alongside your income, debts, and down payment to decide whether to approve you and at what rate. Here's how lenders read the numbers:

Score Range	How Lenders See It	Lender Tier
780 – 900	Excellent	A-lenders, best rates
720 – 779	Very Good	A-lenders, minimal friction
660 – 719	Good	Most A-lenders, some conditions
600 – 659	Fair / Bruised	B-lenders, slightly higher rates
550 – 599	Poor	Private lenders, higher rates and fees
Below 550	Very Poor	Private lenders, larger down payment required

Bad credit is not a binary. There's a significant difference between a 620 and a 480. The lower the score, the more work we need to do. But there are real options at almost every level.

Common reasons people have bruised credit: missed or late payments, medical bills, separation or divorce, job loss, identity theft, or simply never building credit in the first place. None of these make you a bad person. They make you a person who needs a different strategy.

Who Offers Bad Credit Mortgages in Ontario?

Not your bank. Canada's Big Six (TD, RBC, Scotiabank, BMO, CIBC, National Bank) are A-lenders. They want clean credit, stable employment, and T4 income. Bruised credit typically gets a decline. Not because there's no hope. Because their lending criteria are rigid by design.

Here's who does offer mortgages for people with bruised credit:

B-Lenders (Alternative Lenders)

B-lenders are federally or provincially regulated institutions with more flexible underwriting. They lend to people with scores in the 550–659 range, recent missed payments, or non-traditional income. Rates run 1–2% above A-lender pricing, but these are real, legitimate mortgages with real lenders.

Examples in Ontario: Home Trust, Equitable Bank, MCAP, Radius Financial, CMLS.

One thing worth knowing about the stress test. It applies to federally regulated lenders, which covers most of the B-lenders above. Provincially regulated credit unions set their own qualifying rules, and private lenders do not apply it at all. That gap is a real part of why a file that fails at a bank can pass somewhere else on the same income.

Private Lenders

Private lenders are individuals or Mortgage Investment Corporations (MICs) that lend their own capital. They care far more about the property value and your equity than your credit score. Typical terms are 1–2 years. They're a short-term bridge while you repair credit and refinance into a better rate. Rates run 7–12%+ with lender fees. Not for everyone, but they can be the bridge that gets you into a home when nothing else will.

Credit Unions

Credit unions operate under provincial regulation rather than federal, which gives them more flexibility. Some Ontario credit unions are very willing to work with bruised-credit applicants, especially if you have an existing relationship with them or strong local ties.

What Does a Bad Credit Mortgage Actually Cost?

A mortgage with bruised credit will cost more than a mortgage with excellent credit. Here's the honest breakdown:

	A-Lender	B-Lender	Private
Rate	~3.5–5%	~4.75–7.5%	~7–12%+
Lender fees	None	0–1% of mortgage	1–4% of mortgage
Down payment	5% minimum	10–35%+	20–35%+
Broker fee to you	$0	Usually $0 (lender pays)	Sometimes 1–2% on complex files

The most important thing to understand: the gap between A-lender and B-lender rates shrinks once your credit improves. Most clients use a B-lender for 1–2 years, fix their credit, and refinance into an A-lender rate at renewal. That's the strategy.

Refinancing With Bad Credit in Ontario

Everything above assumes you are buying. If you already own your home, the question changes shape completely.

On a purchase, the lender is betting on you. They lean on your score because it is the best guess available about whether you will pay. On a refinance there is a house sitting there with a known value and a known balance owing. Your score still matters. It matters a great deal less.

Equity is the lever, not your score. That one sentence is what most people miss, and it is why a file that gets declined as a purchase can be approved as a refinance the same afternoon, on the same credit report.

How much equity you actually need

Lenders cap what they will advance as a percentage of what the home is worth. That is your loan-to-value, and on a bruised-credit refinance it decides almost everything.

	Maximum LTV	On a $700,000 home
A-lender	80%	$560,000 total mortgage
B-lender	80%, sometimes 85%	$560,000 to $595,000
Private	75–80%	$525,000 to $560,000

Ranges as at September 2026. Individual lenders vary, and most pull back when the local market softens.

So on that $700,000 home with $400,000 owing, you have roughly $160,000 of reachable equity at a B-lender before costs. With $560,000 owing you have nothing to work with, and no amount of good conversation changes that. Run the number first. It answers the question faster than a credit pull does.

The debt consolidation math, honestly

Most people searching for a bad credit refinance are not really shopping for a mortgage. They are trying to get out from under the debt that damaged the credit in the first place.

Here is a file shaped like a lot of them. Say you are carrying $48,000 across two cards at 21%, a line of credit at 12%, and a car loan. Minimum payments come to around $1,650 a month and almost none of it is touching principal. Rolling that into a B-lender refinance at 6.5% might bring the monthly down near $700.

That is a real improvement, and it is why people do it.

Here is the part the ads leave out. You have just moved short-term debt onto a twenty-five year amortization. The payment fell. The total interest you will pay on that debt over its life has probably gone up, not down, unless you keep paying the old $1,650 against the new smaller balance. Add the lender fee, the appraisal, the legal cost and the penalty if you are breaking mid-term, and the gap widens.

A consolidation refinance is a cash-flow fix that buys you room to rebuild. It is not free money and it is not debt forgiveness. If someone sells it to you as either, they are not being straight with you. There is more detail in my guides to debt consolidation through your mortgage and refinancing to clear credit card debt.

What the refinance itself costs

An appraisal runs $300 to $500. Legal is usually $1,000 to $1,800. A B-lender may charge nothing or up to 1% of the mortgage, a private lender 1% to 4%, and on the most complex files a broker fee may apply, which you will hear about from me before anything is submitted.

The prepayment penalty is the one that catches people. On a fixed rate it is the greater of three months interest or the interest rate differential, and an IRD with real time left on the term can run well into five figures. Get that number from your current lender before you do anything else. It changes the answer more often than the rate does.

When refinancing does not make sense

Three situations where I will tell you not to do it.

There is not enough equity. If the numbers do not clear the loan-to-value ceiling plus the costs, the answer is no today, and the work sits on balances and payment history instead. That is a twelve month plan, not a dead end.

The penalty swallows the benefit. If you are two years into a five year fixed and the IRD comes back at $14,000 to save $600 a month, you need almost two years just to break even. Sometimes waiting for renewal is the entire strategy. There is a middle path worth knowing about too. A second mortgage leaves the first one untouched and avoids the penalty completely, at a higher rate on a smaller amount. I have written about getting at home equity without refinancing for exactly this situation.

The debt is going to come back. This is the hard one to say out loud. If the cards get cleared and then refilled over the next two years, what the refinance actually did was convert unsecured debt into debt secured against your house, and the second time around there is no equity left to solve it with. I would rather have that conversation before the application than after it.

Can You Get a Mortgage With No Down Payment and Bad Credit?

In Canada, there is no conventional mortgage product that combines bad credit and zero down payment. CMHC (the government mortgage insurer) requires a minimum 5% down and has minimum credit score thresholds. Private lenders who are flexible on credit are strict on down payment because equity is how they protect their risk.

That said, there are real paths that can reduce how much cash you need upfront:

• Gifted down payment. A family member can gift you the full down payment. This is completely legal and widely used.
• RRSP Home Buyers' Plan. First-time buyers can withdraw up to $60,000 from their RRSP toward a down payment.
• FHSA (First Home Savings Account). Contribute up to $8,000 per year, tax-free, specifically for a first home purchase.
• Borrowed down payment. Some B-lenders allow a down payment borrowed from a line of credit, depending on your overall debt load.
• 12-month savings plan. Sometimes the best answer is repairing credit and building a down payment simultaneously. I've helped many clients do exactly this.

What Lenders Actually Look at When Your Credit Is Below 680

Every file is different, but here's what lenders at every tier are assessing when your score is below 680.

Your actual credit score and what's dragging it down. Before anything else, I pull your credit report and we look at exactly what's causing the low score. Sometimes it's one missed payment from three years ago that's almost fallen off. Sometimes it's maxed-out credit cards that are easy to fix. The diagnosis shapes the strategy.

Your down payment amount and source. The more equity you bring, the more lenders will look past credit issues. A 20%+ down payment opens significantly more doors than 5–10%.

Your income. Lenders want to see you can make the payments. Employment income, self-employment income, rental income, pension, disability benefits. If you're self-employed with bruised credit, that's a complex file, but absolutely workable. It's one of my specialties.

Your debt load. Even with bad credit, strong income and very little other debt can get you approved. Your Total Debt Service (TDS) ratio needs to stay under roughly 44%. If you're carrying significant debt alongside bruised credit, see my guide to how debt consolidation affects your mortgage, it may be part of the solution.

The property itself. Private lenders especially care about the property value. A detached home in Georgetown that's easy to resell is a much easier file than a rural property or a condo in a soft market.

Collections, judgments and what lenders will overlook

Not every derogatory item has to be cleared before you close, and clearing the wrong ones first is a common waste of money.

What has to be dealt with: anything tied to the property, anything owed to CRA, and any judgment registered on title. Those stop a closing outright rather than simply weakening the file.

What can usually be left alone: small consumer accounts, old telecom or utility balances, medical debt. A B-lender will often approve around them when the rest of the file is strong, though they may want them paid out of the advance at closing rather than beforehand.

Whether a collection is paid or unpaid matters less to the score than people assume. Paying it does not remove it, and on some scoring models it resets the date of last activity, which can read worse in the short term. It does matter to the underwriter reading your file, which is a separate question with a different answer. Ask before you pay anything down. The sequence is worth getting right.

Does a co-signer fix bad credit?

Usually not, and this surprises people.

A co-signer with excellent credit strengthens a file that is weak on income. It does much less for a file that is weak on credit, because most lenders tier and price the deal off the weaker applicant rather than averaging the two. Bring in a relative with an 800 score and it is very often still a B-lender file.

Where a co-signer genuinely helps is ratios. If your score is borderline and your debt service is the thing pushing you over the line, added income can move you into a tier you could not reach on your own.

One thing to say plainly before you ask anyone. A co-signer is liable for the whole mortgage, not half of it, and it shows on their credit report, which affects what they can borrow for themselves. It is a real favour, and it deserves a considered decision on both sides.

Here's a rough guide to what tier you're likely looking at:

• Score 580–659: B-lender likely. 10–20% down preferred. Competitive rate with a small premium.
• Score 520–579: B-lender or private. 20%+ down strongly recommended. 1–2 year term to rebuild.
• Score below 520: Private lender most likely. 25%+ down or significant equity required.
• Recent bankruptcy (discharged): Most B-lenders want 1 year post-discharge minimum. Private lenders may work with less.
• Consumer proposal (completed): Some B-lenders consider immediately after completion. Strong income helps significantly.

What a Consumer Proposal Does to Your Mortgage Application

A consumer proposal is not a bankruptcy, and lenders do not read it as one. The distinction is worth understanding, because people routinely assume the harsher timeline applies to them when it does not.

A proposal is reported as an R7 on your credit file. It stays there for three years after you complete it, or six years from the date you filed, whichever arrives first. A bankruptcy carries an R9 and sits on the file longer.

Where that becomes practical: while a proposal is still active, no A-lender is writing your mortgage. Some B-lenders will look at it if you are close to completion and every payment has been made on time. Private lenders will look at it now, if there is equity.

Once it is completed and you are holding the certificate, things move faster than most people expect. Some B-lenders will consider you immediately on completion with strong income and a reasonable down payment. That is quicker than the post-bankruptcy path, which is the whole reason the difference matters.

What lenders want to see afterwards is simple and a little boring. Two or three re-established trade lines paid on time for at least twelve months. A secured card counts. Keep the balances under about thirty percent of the limit and let time do the rest.

If your proposal is still active and you are wondering whether to pay it out early to qualify, talk it through before you write that cheque. Sometimes it genuinely helps. Sometimes the same money does more good sitting in your down payment. For discharged bankruptcies the timelines and the rebuild are different again, and I have covered those in getting a mortgage after bankruptcy in Ontario.

Is There a Free Bad Credit Mortgage Broker Near Me?

Yes, and you're on her website.

Here's how broker compensation works: in the vast majority of cases, the lender pays the broker's fee, not the borrower. When I place your mortgage with a bank, credit union, or B-lender, they pay me a finder's fee for bringing them a qualified client. You pay nothing extra.

The exception: some B-lender and private lender deals involve a broker fee paid by the borrower, typically 1–2%. This happens on the most complex or highest-risk files. If that ever applies to your situation, I will tell you upfront, clearly, before we do anything. You're always free to say no.

So on a standard file the lender pays and you do not. On a private or specialty file a fee may apply, and you will have the number in front of you before anything is submitted. Most of my bad-credit clients never come into an office. We handle it by phone, email and secure document upload, and I work across Ontario.

The Credit Repair Roadmap: B-Lender to A-Lender in 18–24 Months

Here's something most brokers don't say enough: getting the mortgage is step one, not the finish line. The real goal is using that first mortgage as a bridge to a significantly better one at renewal.

• Month 1–2: Get the mortgage. B-lender or private. You're in the home. The clock starts.
• Month 1 onwards: Set up automatic payments on everything. One missed payment undoes months of progress.
• Month 1–6: Pay down credit card debt aggressively. Aim for below 30% utilization on each card.
• Month 3–12: Don't apply for new credit. Every hard inquiry chips your score.
• Month 6–12: Check your credit report. Dispute any errors. They're more common than you'd expect.
• Month 12–18: Review with your broker. If your score has climbed into the 660+ range, start planning the refinance.
• Month 18–24: Refinance into an A-lender product at renewal at a significantly better rate.

Clients who follow this consistently see scores climb 80–120 points within 18 months. That's the difference between a 7% rate and a 5% rate. On a $500,000 mortgage, that's roughly $800 less per month.

Frequently Asked Questions