What is a subprime mortgage in Canada?

A subprime mortgage is a mortgage offered to borrowers who do not qualify with traditional A-lenders (major banks) due to poor credit, insufficient income documentation, high debt ratios, or unconventional property types. In Canada, subprime lending is primarily done by B-lenders (alternative lenders like Equitable Bank, Home Trust, or CMLS) and private lenders. Subprime borrowers pay higher interest rates and fees to compensate the lender for the additional risk.

What credit score do you need for a subprime mortgage in Canada?

B-lenders typically require a minimum credit score of 500 to 600, while private lenders may have no minimum credit score requirement at all — they focus primarily on the property equity. For comparison, A-lenders (major banks) generally require a minimum credit score of 680 for the best rates and 620 for approval. If your score is below 600, you will likely need a B-lender or private lender.

What is the difference between a B-lender and a private lender?

B-lenders are regulated financial institutions (trust companies, credit unions, alternative lenders) that offer mortgages to borrowers who do not meet A-lender criteria but still have reasonable credit and income. They charge rates 0.50% to 2.00% above A-lender rates and are regulated by OSFI or provincial regulators. Private lenders are individuals or mortgage investment corporations (MICs) that lend based primarily on property equity, with little regard for credit score or income. They charge much higher rates (7% to 15%+) plus upfront fees (1% to 3% of the mortgage).

How much more does a subprime mortgage cost?

B-lender mortgages typically cost 0.50% to 2.00% more than A-lender rates — on a $400,000 mortgage, that is roughly $2,000 to $8,000 more per year in interest. Private mortgages cost significantly more: rates of 7% to 15%+ plus lender fees of 1% to 3% upfront and broker fees. A $400,000 private mortgage at 10% costs approximately $40,000 per year in interest alone, plus $4,000 to $12,000 in upfront fees.

Is the Canadian subprime market like the US subprime market that caused the 2008 crisis?

No. Canada subprime market is much smaller and more regulated than the pre-2008 US market. Canada does not have the same securitization structures, liar loans, or NINJA (No Income, No Job, No Assets) loans that fueled the US crisis. Canadian subprime lenders still require significant down payments (typically 20%+ for B-lenders, 25%+ for private), and OSFI regulation of federally regulated lenders prevents many of the risk practices that led to the US meltdown. However, private lending is less regulated and carries higher risk for borrowers.

Subprime Mortgages in Canada: B-Lenders, Private Lenders & Alternative Lending (2026)

Not every borrower qualifies for a mortgage at a major bank. Whether it is a low credit score, self-employment income, or a recent financial setback, the subprime lending market serves borrowers who fall outside standard guidelines. Here is how it works in Canada, what it costs, and how to move back to prime lending.

The lending spectrum in Canada

Canadian mortgage lenders fall into three tiers, each serving different borrower profiles:

Tier	Examples	Typical Credit Score	Typical Rate (2026)	Down Payment	Regulation
A-lenders	RBC, TD, BMO, Scotiabank, CIBC, National Bank	680+ (ideal), 620+ (minimum)	4.00%–5.50%	5%+ (insured)	OSFI (federal)
B-lenders	Equitable Bank, Home Trust, CMLS, IC Savings, Bridgewater	500–650	5.50%–7.50%	20%+ (usually uninsured)	OSFI or provincial
Private lenders	MICs, individual investors	No minimum	7.00%–15%+	25%+ (equity-focused)	Minimal — provincial

Who needs a subprime mortgage?

You may need to go to a B-lender or private lender if:

Situation	Why A-Lenders Say No	Subprime Solution
Low credit score	Below 620 for most banks	B-lenders accept 500+, private lenders focus on equity
Recent bankruptcy or proposal	Banks require 2+ years post-discharge	B-lenders may approve after 1 year, private lenders after discharge
Self-employed, hard to prove income	Banks want 2 years of T1 Generals and NOAs	B-lenders accept stated income or 1 year of documentation
High debt ratios	GDS > 39% or TDS > 44%	B-lenders allow GDS up to 45%, TDS up to 50%+
Non-traditional property	Banks avoid unconventional properties	Private lenders will finance most properties with sufficient equity
New to Canada	Limited credit history	B-lenders have newcomer programs with less stringent credit requirements
Tax arrears or CRA debt	Banks reject applicants with outstanding tax debt	B-lenders and private lenders may approve if equity is sufficient

B-lender mortgages explained

B-lenders are regulated financial institutions that fill the gap between major banks and private lenders.

How B-lender rates work

Component	A-Lender	B-Lender
Posted rate	6.79% (typical posted)	Varies — no standard posted rate
Discounted rate	4.29% (typical)	5.50%–7.50% depending on risk profile
Rate premium	—	+0.50% to +2.00% above A-lender equivalent
Lender fee	None	0% to 1% of mortgage amount
Broker fee	Paid by lender	May require borrower to pay broker fee ($1,000–$3,000)

B-lender qualification

Requirement	Typical B-Lender Standard
Minimum credit score	500–600 (varies by lender)
Down payment	20%+ (most B-lender mortgages are uninsured)
Income documentation	More flexible — may accept 12-month bank statements, stated income for self-employed
Debt ratios	GDS up to 45%, TDS up to 50% (some flexibility)
Stress test	Still applies for federally regulated B-lenders
Property type	Standard residential — may decline unique properties

Major B-lenders in Canada

Lender	Specialty	Notes
Equitable Bank	Broad alternative lending	Canada’s largest alternative lender. EQ Bank digital banking division
Home Trust	Self-employed, newcomers	Strong stated-income programs
CMLS Financial	Subprime and non-prime	Focus on credit-impaired borrowers
IC Savings	Ontario credit union	Alternative programs for GTA borrowers
Bridgewater Bank	Alberta-based	Strong presence in Western Canada
Home Capital Group	Parent of Home Trust	Alternative lending specialist

Private mortgages explained

Private lenders are the last resort when B-lenders also decline the application. They focus almost entirely on the property’s equity.

How private lending works

Feature	Details
Who lends	Individuals, syndicated groups, mortgage investment corporations (MICs)
Rate range	7%–15%+ (interest-only common)
Lender fee	1%–3% of mortgage amount (deducted from advance)
Broker fee	1%–2% (borrower-paid, in addition to lender fee)
Term	Usually 1 year (short-term bridge)
Maximum LTV	65%–75% of property value
Credit check	Minimal or none — equity is the primary consideration
Income verification	Minimal or none
Repayment	Interest-only monthly payments; principal due at term end

Private mortgage cost example: $300,000 on a $450,000 property

Cost Item	Amount
Interest rate	10%
Annual interest	$30,000 ($2,500/month)
Lender fee (2%)	$6,000 (deducted from advance)
Broker fee (1.5%)	$4,500 (deducted from advance)
Legal fees	$1,500
Appraisal	$400
Year 1 total cost	$42,400
Net funds received	$287,600 ($300K − $6K lender fee − $4.5K broker fee − $1.5K legal − $400 appraisal)

At $42,400 per year, the cost is significant. Private mortgages should only be used as a short-term bridge while you work to qualify with a B-lender or A-lender.

The path back to prime lending

The goal of any subprime mortgage should be to improve your situation and qualify for better rates as quickly as possible.

Timeline: private → B-lender → A-lender

Stage	Timeline	Action	Expected Rate
Private lender	Months 0–12	Stabilize finances, start rebuilding credit	8%–12%
B-lender	Months 12–36	Credit score improving, income documented	5.50%–7.50%
A-lender	Months 24–48+	Credit score 680+, stable income, clean history	4.00%–5.50%

Steps to get back to A-lender status

Pay every bill on time — Payment history is 35% of your credit score. Set up auto-pay for everything
Keep credit utilization below 30% — Do not max out credit cards. If your limit is $5,000, keep balances below $1,500
Get a secured credit card — If your credit is rebuilding, a secured card with regular on-time payments helps
Document your income — File taxes on time, keep 2 years of T1 Generals and NOAs ready
Pay down debts — Reduce your TDS ratio by paying off consumer debt
Save for a larger down payment — More equity means better rates and more lender options
Work with a mortgage broker — Brokers know which lenders are most likely to approve your specific profile

Risks of subprime mortgages

Risk	Details
High cost	Subprime rates and fees significantly increase total borrowing cost
Short terms	Private mortgages are typically 1-year terms — you must refinance or pay off annually
Renewal uncertainty	If your situation does not improve, you may face difficulty refinancing at term end
Power of sale	Private lenders may move to power of sale (forced sale) more quickly than banks if you default
Fee stacking	Lender fees + broker fees + legal fees + appraisal fees on a 1-year term create significant drag
Market risk	If property values decline, your equity cushion shrinks, making refinancing harder
Predatory practices	Less regulation in private lending means some lenders may use aggressive terms or hidden fees

Protecting yourself as a subprime borrower

Use a licensed mortgage broker — They are regulated and must act in your interest. Never deal with an unlicensed intermediary
Read every fee disclosure — Know exactly what lender fees, broker fees, legal fees, and other charges you are paying
Get independent legal advice — Have your own lawyer review the mortgage terms, not the lender’s lawyer
Understand the exit plan — Before you sign, know how and when you will move to a better product
Avoid borrowing more than necessary — Private lending is expensive; minimize the amount
Do not sign under pressure — If a lender or broker is rushing you, walk away

The bottom line

Subprime mortgages exist for a reason — they serve borrowers who cannot access traditional lending due to credit, income, or property challenges. But they are expensive and should only be used as a temporary bridge. The goal is always to improve your financial profile and move up the lending ladder to lower-cost options as quickly as possible. Work with a licensed mortgage broker who specializes in alternative lending, and have a clear plan to graduate to A-lender status.