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Canadian mortgage with bad credit

Updated on December 29, 2011

Get a bad credit Canadian mortgage easily

Hey everybody, here is some important information for you if you are considering making a house purchase, and you need a Canadian mortgage loan. Many clients ask me if they can purchase a house with nothing down, and get a 100% mortgage. The simple answer is no, though you may be able to work with the vendor to have them take back a second mortgage to avoid a cash downpayment. The reality is that the Canadian government has inserted a new rule that states that you must have a minimum of at least 5% down.

If you have good credit, it's pretty easy to walk into any bank, and as long as you have a job (and not too much debt), you can usually qualify for a mortgage. The size of the mortgage is dependent on how much you can afford to pay on a monthly basis.

But you are reading this article because your credit isn't the greatest. And that's OK, because you can still get a mortgage, and stop renting. Many clients come to me and say that they are paying $1000 per month on rent, and they would rather pay that $1000/month on a mortgage, rather than just "throw the money away".

Let's look at 2 ways that you can get into the house you want.

Firstly, we know that the Canadian banks have already turned you down due to your poor credit. You probably now know that unless you have a credit score of at least 640 (and preferably 680 or greater), they don't want to talk to you. So the option of buying a house with 5% down is not an option.

If you have poor credit, you will need between 10% and 25% down to make the purchase. The exact amount is determined by how poor your credit is. If you have missed a few payments recently with some of your creditors, then maybe you can get away with 10% down. If you have unpaid collections, written off accounts, or continual late payments, you will probably need 25% down.

We have lenders that can help you.

But let's say that you don't have a downpayment, which in many cases, is the situation. Here's how you can find a house to buy. We have Canada home mortgage lenders that will allow your downpayment to be substituted by a vendor-take-back second mortgage. Now, what is that you ask.

A vendor-take-back mortgage (or VTB) is where the vendor (the house seller) gives you a second mortgage instead of receiving cash.

Here's how it works. Let's say that we can find you a 75% first mortgage. That means that you need 25% more to complete the purchase. But you don't have the money. What should you do? Perhaps the seller doesn't need all of the money in cash, and doesn't mind receiving 75% of the money in cash (from the first mortgage), and then receiving monthly payments from you on a 25% second mortgage.

There you go. You have bought the house without putting anything down.

We help clients everyday with Canadian home equity loans (anywhere in Canada). Go to our website at, fill out our very short application form, and we will call you today.


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