Subprime Mortgage

Find what you need to know about Subprime mortgages in Canada. Subprime Mortgages are mortgages where the interest rate on the note is higher throughout the term of the loan. They are intended for applicants with impaired credit scores and the higher interest rate is a compensation to the lender for accepting greater risk. If you are interested in Subprime Mortgages, Smarter Loans is able to help you find one.

In Canada, Subprime Mortgages are easy to get as long as you are connecting with the right mortgage companies. We are committed to helping you find a mortgage company that is able to offer you a Subprime Mortgage confidently. Below is a directory that includes all of the top lenders for subprime mortgages in Canada. If it’s a subprime mortgage that you are interested in, scroll down and compare the terms, rates and offers.

Keep in mind that the interest rate is higher than traditional mortgages, but if you are prepared then click “apply now” in order to proceed to a brief online application. You can also alternatively pre-apply with Smarter Loans and in that case, we’ll select a subprime mortgage on your behalf, then assign it to you.

We can help connect you with the top subprime mortgage providers in Canada.

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Top Subprime Mortgage Providers in Canada

Interest Rate
$10,000 and up
Varies (Home Equity Loans)
12 Months
Starting at 4.45%

What is a Subprime Mortgage and How Does it Work in Canada?


A subprime mortgage is for borrowers who don’t meet the standard lending criteria. Alternative and private lenders offer subprime mortgages in Canada. Since subprime borrowers typically carry more risk, the rates tend to be higher and often come with a fee from subprime lenders.

Before approving you for a mortgage, lenders consider four main factors for borrowers: your income, down payment, credit and the property itself.

Credit is a common reason why you might seek out a subprime mortgage. If you have poor or damaged credit, prime lenders such as the big banks and credit unions might not consider you. That’s when you’ll need to seek out mortgage financing from a subprime lender to close the deal. If you’re new to Canada or lack a credit history, that’s when subprime mortgages can make sense, too.  Here are some  tips from the Government of Canada to help you improve credit.

Your credit and income may be perfectly fine, but sometimes it’s the properly itself. If you’re buying a unique property type like a house boat or plot of land, prime lenders may not want to touch it. This is where subprime lending may be your only choice. Likewise, sometimes you make an offer on a property and the lender discovers issues during the appraisal. This can cause the property to move from the prime to subprime side.

Why You Might Choose a Subprime Mortgage

The biggest benefit of a subprime mortgage in Canada is that it helps you close the deal. If prime lenders have turned you down, you might have no choice but to go with a subprime lender.  

When going with a subprime mortgage, it’s important to remember that it’s not forever.  You may be able to move into the prime space sooner rather than later. 

Subprime Mortgages in Canada
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Frequently Asked Questions About Subprime Mortgages

When should I consider a subprime mortgage?

If you’ve been turned down for a mortgage by your bank or credit union, you might consider a subprime mortgage. Borrowers with poor credit, a bankruptcy or consumer proposal in their past. Anyone with uncertain income or the inability to provide traditional paystubs. Those seeking a mortgage on an unusual property might struggle to gain approval from more traditional lenders.

Who is eligible for a subprime mortgage?

Eligibility for a subprime mortgage is generally less strict than eligibility for a normal mortgage. Standard requirements include: Canadian residency, age of majority in your province, and a home to secure the mortgage against. As the value of the property is the most important factor with subprime mortgages, the home in question must be in a marketable urban area, to ensure resale value. Subprime mortgages tend to have minimal credit score requirements. Income level, proof of employment, size of down payment and existing debt levels are all also potential factors.

What are the typical terms of a subprime mortgage?

Subprime mortgages generally have higher interest rates than standard mortgages, to help offset the greater risk to the lender. Subprime mortgages also tend to have higher fees than other mortgages, ranging from 2% to 3% of the borrowed amount. The life of the loan is usually fairly short in comparison to standard mortgages.

How are interest rates on a subprime mortgage calculated?

Your credit score, size of your down payment, existing debt, income level and other financial factors all affect what terms you will be able to get on a subprime mortgage, including the interest rate you qualify for. The length of the loan also affects interest rate, as does the choice between a fixed or variable rate.

How do I apply for a subprime mortgage?

Applying for a subprime mortgage starts with gathering all of your financial documentation. You will need to show ID, proof of address, information pertaining to the property being mortgaged (valuation, purchase details, etc.). You’ll be asked to provide financial statements indicating your assets and liabilities, previous tax returns to show income history, and paystubs or other proof of employment. Once you have gathered all of your information, you must complete an application form and submit to the lender for approval.

Are subprime lenders safe to use?

While there can be predatory lenders in the subprime market, seeking to exploit borrowers who have few other options with high interest rates and fees, there are also plenty of reputable subprime lenders who provide a valuable service to this segment of the population. Subprime mortgages are not however regulated by the federal government in the same way as standard mortgages, so it is up to the consumer to do their due diligence.

How common are subprime mortgages in Canada?

Although only 3% of Canadians fall into the “extreme risk” credit category of a score under 520, nearly 9% (3.5 million) of Canadians have subprime mortgages. This discrepancy highlights that it is not just poor credit that can lead borrowers to subprime lenders – many with good credit and non-traditional income revenues, or good credit and an unusual property use a subprime mortgage because of strict traditional mortgage requirements. This makes them a relatively common occurrence.

What are the risks of a subprime mortgage?

A subprime mortgage comes with risks, as does any form of debt. The greatest risk is affordability: as these loans have higher interest rates and fees than other mortgages. The risk to the borrower is greater in times of financial stress. Missing payments can lead to loan default and foreclosure. It is imperative to make sure you can afford any loan, but especially a mortgage, before agreeing to it.

Can I build my credit with a subprime mortgage?

Using a subprime mortgage to access a loan and then paying it off can actually help to repair your credit over the long term. Building a history of on-time payments and financial reliability will, over time, improve your credit score. By using a subprime mortgage to do this, you may actually help yourself qualify for a regular mortgage in the future. This pendulum swings both ways though: if you miss payments on your subprime loan, it will have a negative effect on your credit.

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