If your credit score has taken a hit from missed payments, a consumer proposal, or a period of financial hardship, you may believe that refinancing your Ontario mortgage is out of reach. The good news: that's not true. Canada's mortgage market is structured in tiers specifically to serve borrowers at every credit level. You just need to know where to look — and have a clear plan to work your way back.

Why Credit Score Matters (But Isn't Everything)

Traditional "A" lenders — the big banks and credit unions — use credit score as a primary gating factor. A score below 680 will often result in a decline or significantly higher rates. But A-lenders are only one tier of Canada's mortgage market. Ontario borrowers have access to B lenders (trust companies, alternative lenders) and private lenders, each with different qualification criteria.

Your Real Options for Refinancing with Bad Credit in Ontario

Option 1: B Lenders (Alternative Lenders)

B lenders include trust companies like Equitable Bank, Home Trust, and various monoline lenders that operate outside the OSFI stress test requirements for insured mortgages. They will typically lend to borrowers with credit scores in the 550–650 range, provided there is sufficient documented income and reasonable equity in the property (at least 20–25% equity after refinance).

• Credit scores: typically 550+ accepted
• Rates: usually 1–3% above A-lender rates
• Max LTV: 75–80% of appraised property value
• Income: must still demonstrate ability to service the debt
• Term: 1–3 year terms common, designed to rebuild toward A-lender status

Option 2: Private Mortgage Lenders

Private lenders — Mortgage Investment Corporations (MICs), private investors, and syndicates — are the most flexible option in Canada's lending ecosystem. They focus almost entirely on the equity in your property, not your credit score. If you have been discharged from bankruptcy, have a recent consumer proposal, or have multiple derogatory marks on your credit bureau, a private lender may be your only short-term option.

• Credit scores: not the primary factor — equity is
• Rates: typically 8–14% annually
• Max LTV: 65–80% depending on lender and property location
• Term: 6–24 months (temporary bridge to better rates)
• Fees: expect 1–3% lender fee and standard legal/appraisal costs

Option 3: Refinancing Through a Co-Borrower

If you have a spouse, family member, or close friend with strong credit who is willing to be added to the title and mortgage, an A-lender may approve the refinance based on the co-borrower's credit profile. This is a legitimate strategy but requires careful legal planning — the co-borrower will be jointly liable for the mortgage and will appear on the property title.

The 5 Steps to Refinancing with Bad Credit in Ontario

1. 1Get a current credit report from both Equifax and TransUnion — know exactly what's on there before a lender sees it
2. 2Have your property appraised to know your current equity position — this determines which lender tier you qualify for
3. 3Work with a licensed mortgage broker (not just one bank) who can present your file to B and private lenders simultaneously
4. 4Accept a short-term solution with a documented improvement plan — don't just accept a 1-year private mortgage without a clear roadmap to better rates
5. 5Execute the credit and income improvement plan during the term so you qualify for conventional rates at renewal

How to Improve Your Credit While in a Private or B Mortgage

A private or B mortgage should always be temporary. During your term, focus on these specific actions that have the highest impact on your credit score in Ontario:

• Pay every single obligation on time — payment history is 35% of your credit score
• Dispute any inaccurate entries on your bureau — errors are more common than most people think
• Keep credit card balances below 30% of your limit (ideally below 10%)
• Do not apply for new credit — each hard inquiry lowers your score temporarily
• If you had a consumer proposal, ensure it is accurately marked as "Discharged" — not just "Filed"
• Consider a secured credit card with a $500–$1,000 limit if you have no active revolving credit

How Much Will Refinancing with Bad Credit Cost in Ontario?

Refinancing with impaired credit in Ontario costs more than a standard refinance — that is a reality you need to budget for. Here is a realistic breakdown for a $400,000 private mortgage refinance:

• Lender fee: $4,000–$12,000 (1–3% of loan amount)
• Appraisal: $400–$600
• Legal fees (borrower + lender): $2,500–$4,500
• Mortgage broker fee: varies; required to be disclosed upfront in Ontario
• Higher monthly interest: $2,667–$4,667/month at 8–14% on $400K

Frequently Asked Questions

Can I refinance if I just finished a consumer proposal?

Yes. Private lenders can fund within 30–90 days of your proposal being discharged. B lenders typically want to see 12–24 months of re-established credit after discharge. The key is that the proposal is fully discharged — not just filed.

Does refinancing with bad credit hurt my credit score more?

The mortgage application will generate a hard inquiry, which temporarily lowers your score by 5–10 points. However, if the refinance allows you to consolidate high-interest debt or catch up on missed payments, the medium-term impact on your score is strongly positive.

How long until I can qualify for an A-lender mortgage after bad credit?

With a disciplined improvement plan, most Ontario borrowers can qualify at A-lender rates within 12–24 months of starting a private or B mortgage. The timeline depends on the nature of your credit event and how aggressively you rebuild.