There are several mortgage lenders and banks who will approve a bad credit mortgage in Ontario. Bad credit is no stranger to many Canadians—studies show that nearly 20% of Canadians have an “extreme” or “bad” credit score. This makes it harder to get approved for loans, credit cards, apartments, and especially mortgages.
So, how can you get a mortgage if you’re in this situation? What banks who will approve a bad credit mortgage in Ontario should you look at? Let’s break it down.
What Counts as Bad Credit?
In Canada, credit scores range from 300 to 900.
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Excellent: 750+
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Good: 680–749
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Fair: 600–679
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Bad: Below 600
Typically, major banks won’t approve a mortgage unless you have at least 650, and it’s even better to be above 680. That said, there are banks who will approve a bad credit mortgage in Ontario if you fall under 600—but they may not be the traditional “A lenders.”
If you’re not sure where you stand, you can check your score with Equifax Canada or TransUnion Canada.
Chart: Credit Score Categories in Canada
| Credit Score Range | Rating | Typical Lender Options |
|---|---|---|
| 750–900 | Excellent | All Banks, A Lenders |
| 680–749 | Good | Banks, Credit Unions |
| 600–679 | Fair | Some Banks, B Lenders |
| Below 600 | Bad | B Lenders, Private Lenders |
What Type of Lenders Will Approve a Bad Credit Mortgage?
If your score is below 600, banks who will approve a bad credit mortgage in Ontario usually fall into one of these categories:
1. A Lenders (Big Banks)
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Require 650+ credit score.
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Rarely approve bad credit mortgages.
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Lower rates, stricter rules.
2. B Lenders (Alternative Banks)
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Includes credit unions, trust companies, and monoline lenders.
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More flexible than A lenders.
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May approve borrowers with credit scores as low as 550–600.
3. Private Lenders
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Don’t usually require a minimum credit score.
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Approve based on equity in your home and down payment.
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Higher rates, shorter terms, and additional fees.
Table: Down Payment Guidelines by Lender Type
| Lender Type | Typical Down Payment | Credit Requirement | Notes |
|---|---|---|---|
| A Lender / Bank | 5% | 650+ | Best rates, strict rules |
| Trust Companies | 5–20% | 600+ | Flexible with bruised credit |
| B Lender | 20%+ | 550–600+ | Case-by-case approvals |
| Private Lender | 20%+ | None | Focus on equity, not score |
Examples of Banks and Lenders
When searching for banks who will approve a bad credit mortgage in Ontario, here’s what you should know:
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Credit Unions: Some Ontario credit unions are more lenient with lower credit scores compared to the big banks.
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Trust Companies & Monoline Lenders: These “B lenders” specialize in borrowers with bruised or bad credit.
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Private Mortgage Lenders: Often used as a short-term solution until credit improves.
💡 Key Tip: Each lender has unique programs, and approvals depend on your equity, income proof, and property location.
Who Governs These Lenders in Ontario?
When dealing with banks who will approve a bad credit mortgage in Ontario, it’s important to know who oversees them. Each type of lender operates under different regulatory frameworks:
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Chartered Banks (A Lenders): Governed federally by the Office of the Superintendent of Financial Institutions (OSFI) and must follow strict lending rules, including the mortgage stress test.
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Credit Unions: Regulated provincially by the Financial Services Regulatory Authority of Ontario (FSRA). They often have more flexibility than federally regulated banks, which can benefit borrowers looking for mortgage renewal options with bad credit.
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Trust Companies & Monoline Lenders (B Lenders): Also overseen by FSRA if they operate in Ontario, but some may be federally supervised depending on their structure.
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Private Lenders: These are not banks but individuals or mortgage investment corporations (MICs). They are subject to FSRA rules when operating in Ontario and must follow provincial lending laws. Many Canadians turn to them when they need private mortgage solutions to consolidate debt, property tax arrears or deal with financial challenges.
| Lender Type | Governing Body | Flexibility Level |
|---|---|---|
| Chartered Banks (A Lenders) | OSFI (Federal) | Low |
| Credit Unions | FSRA (Ontario) | Medium |
| Trust Companies / Monolines | FSRA / OSFI | Medium–High |
| Private Administrative Lenders / MICs | FSRA (Ontario) | High |
Knowing who governs these lenders helps borrowers understand why rules and flexibility differ across institutions. For example, while OSFI enforces the strict stress test on big banks, FSRA allows credit unions and private lenders to be more accommodating for those with bad credit.
Fees and Costs with Bad Credit Mortgages
Getting approved with bad credit usually comes with extra costs:
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Higher Interest Rates (private lenders may charge 7–12%+)
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Lender Fees (1–3% of loan amount)
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Appraisal Costs ($500–$700)
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Legal Fees
Closing costs vary by lender, so it’s best to confirm exact numbers with your mortgage professional before signing.
Why Use a Mortgage Broker?
Mortgage brokers are often the easiest way to connect with banks who will approve a bad credit mortgage in Ontario. Here’s why:
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Brokers work with dozens of lenders (banks, credit unions, private lenders).
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They can compare rates and terms on your behalf.
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Save time by handling the paperwork and negotiations.
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Can often secure better rates than you’d find on your own.
Example Scenario:
Imagine Sarah, a homeowner in Oshawa, who had a credit score of 570 due to missed payments during the pandemic. Her bank declined her renewal, but her broker connected her with a B lender who approved her mortgage at 20% down. This gave her time to rebuild her credit before switching back to an A lender.
FAQ – Banks Who Will Approve a Bad Credit Mortgage in Ontario
1. Can I get a mortgage in Ontario with a 550 credit score?
Yes, through B lenders or private lenders, depending on your down payment and property equity.
2. Do big banks approve bad credit mortgages?
Rarely. Most require 650+, but there are alternative banks who will approve a bad credit mortgage in Ontario.
3. What is the interest rate for a bad credit mortgage?
Rates vary: B lenders (5–8%), private lenders (7–12%+).
4. How much do I need for a down payment with bad credit?
Expect at least 20% with B or private lenders.
5. Should I use a broker?
Yes. A broker can connect you with banks that will approve a bad credit mortgage in Ontario faster and often with better terms.
Final Thoughts
Getting approved with bad credit isn’t easy, but it’s possible. By working with banks that will approve a bad credit mortgage in Ontario, you can secure a home while improving your credit over time.
If you’re unsure where to begin, reach out to LendToday. Our team works with banks, trust companies, and private lenders across Ontario to help you find the best solution—even with bad credit.
📞 Call us at 1-855-242-7732 or apply online today.
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