I’ve sat across from hundreds of Alberta homeowners who’ve heard the banks tell them no time and again when it comes to getting a loan. It’s discouraging.
The same is true for those trying to get a mortgage.
In this guide, I’ll walk you through every bad credit mortgage option available to Alberta homeowners in 2025. I’m breaking this article down into two parts. In Part 1, we’ll look at B lenders, private lenders, monoline lenders, and credit unions for those who need a new mortgage.
Part 2 is all about current homeowners with bad credit who need access to their home’s equity. The second part is the work we do, but I’m often asked a range of questions, including from those who are getting turned down by the Big Six banks for a mortgage.
It’s helpful to know all your options.
Maybe you’re in a tight spot with bad credit and could benefit from a second mortgage rather than trying to finance a new one when considering something like downsizing.
I’ll cover some of the following:
- What counts as bad credit
- Your options for getting a mortgage with bad credit
- Second Mortgages and Their Risks
What counts as bad credit?
It’s important you know what lenders consider bad credit.
680 or higher are the numbers many banks want to see before they’ll approve a mortgage.
But your credit score is just one number. It doesn’t tell your whole story. People come to us going through all kinds of things. We’ve seen divorce. We’ve talked through bankruptcy. Medical emergencies.
All of it.
So, trust me, you still have options.
Part 1: Your bad credit mortgage options
When the banks turn you down, you’ve got a couple of options. B lenders, private lenders, and credit unions are the main ones.
B lenders
B lenders sit between traditional banks and private lenders. They’re often federally regulated financial institutions, just like the Big Six, but they’re more willing to work with borrowers who have credit challenges.
These lenders will typically consider your application if your credit score is between 500 and 680. They often look at:
- Your current employment and income stability
- Whether your credit issues are in the past or ongoing
- Your home equity position
- Your debt service ratios
- The risks you need to understand
B lenders charge higher interest rates than traditional banks.
You’ll also likely need a down payment if you’re buying a home.
Most B lender mortgages have terms of 1 to 5 years.
Private lenders
Private lenders use their own funds to issue loans. Their goal is to give you options that banks and B lenders can’t offer. They provide you with flexibility. Private lenders can offer adaptable loan terms due to their unregulated status, but borrowers pay more for these flexible options.
Not going to lie to you, though, the interest rates they provide for loans exceed standard bank rates. They base their lending decisions on the amount of home equity borrowers have rather than their credit history.
It’s important to know that they are not a long-term solution. They’re too expensive. However, they are great for a year or two to give you some breathing room and to get things under control.
The real benefit of private lenders is that you use them for stabilization, cleaning up your credit, and then refinancing with a bank within a year or two.
Monoline lenders
Monoline lenders are companies that only do mortgages. No chequing accounts, no credit cards, no investment products. Just mortgages. Companies like First National, Merix Financial, and MCAN Home are among Canada’s largest non-bank mortgage lenders.
They often have more flexible lending criteria than banks. Many of them offer alternative mortgage products designed specifically for borrowers who don’t fit the traditional bank mold.
There’s a catch, though. Most monoline lenders work exclusively through mortgage brokers. That’s actually not a terrible thing. A broker knows which monoline has the best product for your specific situation.
Credit unions
Alberta has several credit unions. Some of the better known include Servus Credit Union, Connect First, and Conectus Credit Union.
Credit unions are member-owned, which sometimes makes them more willing to look at your individual circumstances rather than just your credit score. They often have more flexibility in their lending criteria than the Big Six banks.
That said, they’re still fairly conservative. You’ll typically need a credit score of at least 600, and you may face higher rates than you would at a traditional bank.
Part 2: Accessing Your Home’s Equity
Then there are those homeowners who need a loan but can’t get the bank to take them on. If they own a home, they can access its equity. That’s where we come in.
Get Your Pre-Approval, No Obligations
Second mortgages function as a home equity loan that takes position behind your existing first mortgage to provide access to your property value. Your initial mortgage payment remains the same, but you’ll need to make an additional payment on top of it.
Second mortgage lenders like us make loan decisions based on home equity rather than credit scores.
Our team at Draft Financial assists numerous Alberta homeowners with credit scores under 600 obtain second mortgage funding for their homes. Our assessment of your current financial situation takes precedence over your past financial history.
Second mortgages in Alberta helps borrowers manage their debt consolidation needs and handle unexpected expenses and property value growth.
The risks you need to understand
You deserve to understand what you are getting when considering a mortgage with bad credit or a second mortgage. You’re going to face higher interest rates with bad credit mortgages. And if things don’t go right once you’re locked in, you may be forced into foreclosure if you can’t manage the payments.
The same is true of second mortgages. Your home serves as security for the loan.
You must assess your ability to afford the second mortgage payment through all possible scenarios before signing any mortgage agreement.
Moving forward with confidence
I’ve walked you through two scenarios: getting a mortgage with bad credit and unlocking your home equity. Depending on your situation, a second mortgage may be your best option. More recently, we’ve helped many people use second mortgages to consolidate their debt.
Our team has assisted numerous Alberta homeowners who received rejections from the banks. We look for solutions that fit your specific situation rather than forcing you into the most expensive option.
Your financial history contains more than just your credit score. We want to hear your story.
