Private Mortgage for Bad Credit: How to Get Approved

Why Banks Reject Bad Credit Borrowers

Applying for a mortgage with a bad credit score in Canada can be discouraging. Most major banks and traditional lenders follow strict federal lending rules, and one of the first boxes they check is your credit score. If yours is below 680—or if you’ve experienced bankruptcy, missed payments, or high debt ratios—you’re likely to be denied outright, regardless of your income or assets.

But not all doors are closed. Private lenders offer a pathway to homeownership or refinancing even with poor credit. These lenders use different criteria to assess risk, making it possible to get approved for a bad credit private mortgage in Canada.

This article explains:

How private mortgage lenders assess bad credit
What you need to qualify
Practical tips to improve your chances of approval
A list of top private lenders that work with bad credit borrowers
And how to plan for better mortgage options in the future

How Private Lenders Assess Credit Differently

While banks view bad credit as a high-risk disqualifier, private lenders look at the bigger picture—especially the value of the property you own or plan to purchase.

Key Differences Between Banks and Private Lenders:

Criteria	Traditional Banks	Private Lenders
Credit Score Requirement	680+ (typically)	No minimum required
Debt-to-Income Ratio Limits	Strict	Flexible
Income Verification	Full-time employment required	Alternative income accepted
Approval Time	2–4 weeks	2–5 days
Focus	Borrower’s financial history	Property equity and exit strategy

Private lenders focus primarily on the loan-to-value ratio (LTV)—the amount you’re borrowing compared to the market value of the home. If you have sufficient equity (or a large down payment), they may overlook bad credit entirely.

Tips for Securing a Private Mortgage with Bad Credit

Getting approved for a private mortgage when you have bad credit is very possible—but it helps to be organized, transparent, and strategic.

1. Focus on Equity or Down Payment

Private lenders are willing to overlook bad credit if the risk is offset by equity.

Refinancing? Aim for an LTV below 75%
Buying? A 20–30% down payment strengthens your case

2. Prepare Clear Documentation

Even if you don’t have traditional proof of income, be ready to show:

Bank statements (6–12 months)
Proof of rent received (for landlords)
Invoices or contracts (for self-employed individuals)

3. Explain Your Credit Issues

Be upfront about your financial history. If your credit suffered due to a job loss, illness, divorce, or pandemic-related issue, lenders may be more flexible if they understand the context and timeline.

4. Work with a Private Mortgage Broker

A broker who specializes in alternative home loans can:

Find the right lenders for your situation
Help structure your loan to minimize risk
Reduce your chances of rejection

5. Have an Exit Strategy

Private mortgages are short-term solutions. Your lender will want to know how you plan to repay or refinance the loan—whether through improved credit, a property sale, or bank refinancing.

Common Uses of Bad Credit Private Mortgages

Private mortgages aren’t just for buying a home—they’re often used to resolve financial setbacks or take advantage of opportunities.

Mortgage arrears or power of sale prevention
Debt consolidation
Second mortgages for renovations or business capital
Bridge financing while waiting for traditional loan approval
Self-employed income stabilization

Best Private Lenders for Bad Credit Mortgages in Canada

While private lenders don’t typically advertise the way banks do, several firms and networks specialize in non-traditional lending and bad credit mortgage approvals.

Notable Private Mortgage Lenders and Broker Networks:

Equity Mainly Matters
- Specializes in Ontario-based bad credit and emergency mortgages
- Fast approvals for borrowers with credit issues or legal arrears
- Learn more →
Canadalend
- Works across Ontario and Alberta
- Offers second mortgages, debt consolidation, and poor credit solutions
Mortgage Broker Store
- Offers access to private lending networks in Ontario
- Known for helping clients with credit scores under 600
Clover Mortgage
- Licensed broker network with access to B-lenders and private lenders
- Transparent about rates and bad credit approval requirements
Tribecca Finance
- Offers bad credit mortgages and home equity loans
- Works with borrowers declined by major banks

Always confirm that any lender or broker is licensed in your province and registered with the appropriate regulatory body (e.g., FSRA in Ontario).

Understanding Costs: What to Expect with a Bad Credit Private Mortgage

Because private lenders take on more risk, their loans come with higher rates and fees than bank mortgages.

Interest rates: Usually between 8% and 14%
Lender fees: Typically 1%–3% of loan amount
Broker fees: Around 1%–2.5%, depending on loan size
Legal and appraisal fees: $2,000–$3,500 on average
Short-term terms: 6–24 months, often interest-only

Always review the total cost of borrowing (TCB) with your broker or lawyer before proceeding.

Conclusion: Improving Credit for Better Mortgage Options

A bad credit private mortgage in Canada can be a financial lifesaver, giving you access to funds when banks say no. It can help you:

Avoid foreclosure
Pay off urgent debts
Consolidate payments
Buy time to rebuild credit

But it’s not meant to be long-term.

To transition to a better mortgage later:

Begin making payments on time
Pay down debt and keep credit utilization low
Monitor your credit score monthly
Refinance with a traditional lender after 6–18 months, once your profile improves

Need Help Getting a Mortgage with Bad Credit?

If you’re struggling with poor credit but need a mortgage solution today,
Contact Equity Mainly Matters for fast, confidential advice and custom loan options.

Their team specializes in bad credit private mortgages across Ontario and beyond—helping you get approved and plan for long-term financial recovery.

Frequently Asked Questions (FAQ)

1. Can I get a mortgage in Canada if I have bad credit?

Yes. While traditional banks may reject applicants with low credit scores, private mortgage lenders offer alternative home loans based on property equity, not just credit history. If you own a home or have a large down payment, approval is very possible—even with a credit score below 600.

2. What credit score is considered “bad” in mortgage applications?

Generally, a score below 680 is considered risky by major lenders. A score under 600 is viewed as poor and is usually rejected by banks—but not by private lenders, who look at the total financial picture.

3. How much can I borrow with a bad credit private mortgage?

This depends on your home’s value and existing equity. Most private lenders will finance up to 75–80% loan-to-value (LTV). For example, if your home is worth $600,000 and you owe $300,000, you could potentially borrow up to $180,000 as a second mortgage.

4. How fast can I get approved?

Approval for a bad credit private mortgage can happen within 24–72 hours, with funding shortly after. This is much faster than banks, which typically take 2–4 weeks.

5. Do I need to verify income if I have bad credit?

Private lenders are more flexible with income requirements. Many accept self-employment income, rental income, bank statements, or other non-traditional proof of earnings. However, the stronger your proof of income, the better your rate and terms.

6. Are private mortgage interest rates higher?

Yes. Interest rates typically range from 8% to 14%, depending on risk factors. These loans are short-term and intended to help you recover and transition back to traditional financing.

7. Will this impact my credit further?

If you default on a private mortgage or miss payments, it can negatively impact your credit. However, if you stay current, the loan can help stabilize your financial profile and eventually improve your credit rating.

8. How long are bad credit private mortgage terms?

Terms are usually short—6 to 24 months—with interest-only payments. This gives you time to repair credit, reduce debt, and refinance at a better rate later.