Bad Credit Mortgage in Canada: What Your Score Actually Costs in 2026

Tuesday, 6 October 2026 — the bottom line: a bad credit mortgage in Canada is not a separate product. It is the same loan, priced for risk. With the best A-lender five-year fixed at 4.34% and the Bank of Canada policy rate held at 2.25% since 2 September, a borrower who lands at a B lender instead of a bank pays about $355 more a month on a $500,000 mortgage, plus a lender fee near $5,000. Count the slower principal paydown and the first twelve months cost roughly $12,950 more. Repairing a score takes 12 to 24 months. The arithmetic below tells you whether waiting is worth it.

Only the A-lender rates in this article are market quotes, pulled 6 October 2026. Every B-lender and private rate here is an illustrative assumption used to show the shape of the cost, not a quote you can hold anyone to.

What lenders actually mean by bad credit

Canadian credit scores run 300 to 900. Lenders read the bands roughly as poor at 300 to 559, fair at 560 to 659, good at 660 to 724, very good at 725 to 759 and excellent at 760 and up.

Banks and other A lenders generally want 680 or better on a conventional mortgage with 20% down. Default insurance on a high-ratio mortgage needs about 600. B lenders work from roughly 500 to 650. Private lenders and mortgage investment corporations often set no score floor at all, because they underwrite the property and your equity rather than your payment history.

That gap is narrower than most people expect. The average score on newly insured mortgages in Canada has sat above 750 for years, so a 640 does not feel borderline to you but reads as well below the pack to an underwriter. Our breakdown of A, B and private lenders covers how the three tiers differ beyond price.

Your score is also not the only trigger. A thin file, a recent collection, an undischarged consumer proposal or two late payments in the past year can push an otherwise strong application into bad credit mortgage pricing on its own.

What a bad credit mortgage costs at each score band

Here is the same $500,000 mortgage on a 25-year amortization, priced across the bands. Payments use Canadian semi-annual compounding.

Credit score	Likely lender	Rate used	Monthly payment	Premium vs 4.34%
680+	A lender	4.34% (market, 6 Oct)	$2,723.07	—
640–679	A lender with conditions, or a top-tier B	4.84% (illustrative)	$2,862.65	+$139.58
600–639	B lender	5.59% (illustrative)	$3,078.20	+$355.13
560–599	B lender, upper end of its range	6.59% (illustrative)	$3,376.44	+$653.37
Under 560	Private lender or MIC	9.50% (illustrative)	$4,305.14	+$1,582.07

Read the right-hand column as the monthly price of your credit file. Moving from the 600–639 band into A-lender territory is worth about $4,260 a year on this mortgage, every year, for as long as you hold it.

For context on where A-lender pricing sits today: the best insured three-year fixed is 4.19%, the five-year fixed 4.34%, and the best five-year variable 3.25% against a 4.45% prime rate. The five-year Government of Canada bond closed at 3.60% on 2 October, the most recent close published.

The first-year bill on a $500,000 mortgage

Rate alone understates what a bad credit mortgage costs, because B and private lenders charge a lender fee up front and your balance falls more slowly when more of each payment is interest.

Tier	Rate	Payment	Year-one interest	Lender fee	Year-one cost	Balance at month 12
A lender	4.34%	$2,723.07	$21,283.49	$0	$21,283.49	$488,606.71
B lender (illustrative)	5.59%	$3,078.20	$27,390.53	$5,000	$32,390.53	$490,452.10
Private first (illustrative)	9.50%	$4,305.14	$46,363.85	$15,000	$61,363.85	$494,702.19

The B-lender route costs $11,107 more in interest and fees over twelve months, and leaves you owing $1,845 more. Call it $12,952 for one year of a 620 score. The private route costs $40,080 more in interest and fees and leaves $6,095 more on the balance, or about $46,175 all in.

Private lenders also commonly write interest-only terms. At 9.50% on $500,000 that is $3,958.33 a month and no principal repaid at all. The payment looks easier than $4,305.14. It is not cheaper.

Why the lender fee does more damage on a short term

B and private terms are usually one or two years, not five. A $5,000 fee on a one-year term is effectively another full percentage point of cost. Spread over five years it would be about 20 basis points a year. Same fee, five times the bite.

Over a realistic two-year B term the all-in gap against A pricing reaches $20,822 — $12,173 in extra interest, the $5,000 fee, and $3,649 of principal you did not pay down. Our note on what B lenders require and charge goes through the qualifying side in detail, and the true cost of a private mortgage covers broker and legal fees on top of the lender fee.

Always ask for the fee in dollars and ask whether it is deducted from the advance or added to the balance. Those are different loans.

Consumer proposals, bankruptcies and the clock

Insolvency has its own timetable, separate from your score.

A lenders typically want roughly three years past the completion of a consumer proposal, and six to seven years past discharge on a first bankruptcy, with re-established credit in between. B lenders will look much earlier, often within a year or two of discharge, usually with 20% down and a lender fee. Private lenders will look immediately if the equity is there.

Two details catch people out. The clock usually starts at completion or discharge, not at filing, so paying a proposal out early moves your mortgage date forward. And re-established credit means active accounts reporting on time, not merely the absence of new damage — an empty file after discharge still reads as unproven.

How to move up one tier before you apply

If your closing date is not fixed, the repair work usually pays better than any rate shopping you can do at a lower tier. Concrete steps, in the order that moves a score fastest:

• Pull both your Equifax and TransUnion files and dispute errors in writing. Reporting mistakes are common and cost nothing to fix.
• Get every balance under 30% of its limit, and under 10% on at least one card. Utilization moves a score within one or two reporting cycles.
• Pay everything on time for twelve consecutive months. Payment history is the heaviest input and there is no shortcut.
• Deal with collections. A paid collection still shows, but underwriters treat paid and unpaid very differently.
• Open a secured card if your file is thin. Three active tradelines with two years of history is a common A-lender expectation.
• Stop applying for credit six months before your mortgage application. Every hard inquiry costs you points at the worst time.
• Do not close old cards. Age of file is doing quiet work for you.

Expect 12 to 24 months for a meaningful move. On the numbers above, a year of that work is worth about $12,950 on a $500,000 mortgage, and it keeps paying every year after.

When paying B or private pricing is the right call

Sometimes a bad credit mortgage is the cheaper option. It usually is when a deadline is real: a firm closing you cannot move, property tax or mortgage arrears heading toward a power of sale, or a renewal your current lender has declined and you need somewhere to land. A few thousand dollars of extra interest beats losing a deposit or a house.

What matters then is the exit, not the rate. Take a two-year B term at 5.59% and refinance into 4.34% A pricing afterwards, and over five years you are about $20,977 behind a borrower who qualified at a bank from the start. That is a real number, but it is a finite one, and it ends.

Before signing anything above A pricing, get three things in writing: the full fee schedule including broker and legal costs, the prepayment terms, and what the lender will need to see at renewal. A lender who cannot tell you what gets you out should not be the one letting you in.

Rate direction is a live variable in all of this. Markets currently lean toward the Bank of Canada holding at 2.25% on 28 October, though that is a market expectation and it can change — our October decision preview has the detail. August inflation ran at 3.0% with core trim at 1.9% and median at 2.0%; unemployment sat at 6.4% with employment down 42,000. The September jobs report lands 9 October and September inflation on 19 October.

Common questions

What is the minimum credit score for a mortgage in Canada?

There is no single floor. Default insurance on a high-ratio mortgage generally needs about 600. Most A lenders want 680 or better on a conventional mortgage. B lenders work down to roughly 500, and private lenders often set no minimum because they lend against equity. Below 600 you should expect 20% down or more.

Does taking a bad credit mortgage damage my score further?

Not by itself. A mortgage reported on time is one of the strongest positive tradelines you can carry, and two years of clean mortgage payments is exactly what an A lender wants to see at renewal. The risk is the payment size: if the higher payment pushes your cards back up, the mortgage that was meant to rebuild your file ends up holding it down.

How soon can I refinance out of a bad credit mortgage?

Most B and private terms run one to two years precisely so you can. Whether you actually move depends on your score, your income documentation and your equity at that point, and nobody can promise the approval in advance. Start the conversation about 120 days before maturity, which gives you time to shop the A tier before your lender's renewal offer is the only one on the table.