In Canada, an important financial indicator for any person to get a mortgage is their credit score. But how do you know that if you have a poor credit score in the first place? The score assigned by the credit bureau is anywhere between 300 and 900. If you have a credit score that is high, you can qualify for a lower mortgage rate, and vice-versa. Below-mentioned is a few tips on how one can secure a mortgage even with a bad credit score in Toronto.

Try to improve your credit score

As mentioned earlier, a good credit score qualifies you to get the lowest mortgage rates, resulting in lower monthly mortgage payments. If you have a credit score that is too low to qualify for a mortgage, you may want to consider improving the score before applying for a mortgage. Below-mentioned is a few tips to improve your credit score:

  • Always pay your bills on time: Avoid missing out on monthly payments on any of your bills, which may include your credit card bill, utilities, car loan etc. If you are struggling to pay the bill amount in full, do not ignore it, as it can harm your credit score even further. The alternative solution is to contact your provider for a payment plan that you can afford.
  • Try to stay under your credit limit: Ensure you do not use more than 30% of your available credit limit either on your line of credit or credit cards. This will give an impression to the credit-lending agencies that you are a cautious spender.
  • Avoid applying for too much new credit: Do not apply for too many credit cards, as credit-lending agencies will assume that you need cash desperately.
  • Keep your oldest account open: The length of your credit history has a direct impact on your credit score. Keep your old credit cards open even if you don’t use them just to maximize the length of your credit history.
  • Applying these above-mentioned tips will guarantee an increase in your credit score after a couple of months.
  • Save for a larger down payment

A lender will look at more than your credit score when considering approving your mortgage application. They take into consideration other factors like, your debt levels, the size of your down payment, including your income. The minimum down payment to be made to purchase a house in Canada is 5% of the property listed price. If your credit score is poor, the lender may request you pay a higher down payment, as it is risky for them to lend to you. If you have a poor credit score, try to save somewhere between 20 – 25% for a bad credit mortgage. Not only does it give an impression to the lender that you are financially stable to own a property, but it also significantly lowers your monthly mortgage payment. Additionally, saving for a higher down payment means you do not have to pay for mortgage default insurance, which is mandatory for any person in the country getting a mortgage with a down payment of less than 20%.

  •  Find a reliable bad credit mortgage lender

In Canada, to get approved for a mortgage from a traditional lender, you need to have a credit score of 600 and above. If your credit score is less than 600, there is a strong chance that your mortgage loan will be denied by these lenders. In instances like this, you will have to look for a private lender like Matrix Mortgage Global in Toronto, who works exclusively with individuals that have poor credit scores. Even if you have in the past two years applied for bankruptcy, we will consider your mortgage application. Keep in mind, if you work with a private lender, you will likely pay for some extra fees that you would not normally pay with a bank. It is usually 1 – 2% of the mortgage amount. For example, if you apply for a mortgage of $400,000, the extra charge would be $2,000.

  •  Consider getting a co-signer or a joint mortgage

Another option to apply for a mortgage with bad credit in Canada is to get a co-signer on your mortgage. They act as the guarantor of the property. In the event you are struggling to make your monthly mortgage payments, the co-signee will make the payments on your behalf. Additionally, getting a co-signer onboard gives you access to much better mortgage rates, as their income and credit score will also be taken into consideration during the application process. One of the risks of having a co-signer for your mortgage is that if you fail to make the scheduled payments, it can cause a lot of problems as your co-signer is financially responsible as well. For this very reason, most co-signers are family members like your parents, etc. Another option is a joint mortgage where two people make scheduled monthly payments for the same property.

  •  Work towards renegotiating your next renewal

Remember, any bad credit mortgage can be renegotiated at the end of your term. Most terms are usually five years. That is plenty of time for one to renew their financial situation. Try to improve your credit score between the start of your mortgage and the renewal date. Negotiating for better terms can help you save thousands of dollars in interest. Irrespective of your financial position, you should always do your market research and shop for the best mortgage rates when you renew. A common mistake made by most people is that they renew with the same lender at a higher rate.


There are plenty of options to qualify for a mortgage with bad credit. Yes, they are expensive and will definitely result in a higher monthly mortgage payment. Following the above-mentioned tips will ensure your credit score enhanced in the following months. Changing your spending habits will also give you access to better interest rates for your mortgage. If you are looking to apply for a bad credit mortgage in Toronto, get in touch with the team at Matrix Mortgage Global to schedule an appointment.