Getting a Mortgage with Past Bankruptcy in Canada

Understanding Bankruptcy

Bankruptcy is a legal process that provides relief to individuals who are unable to pay their debts. It’s a last resort option that can affect your credit rating and ability to secure any new borrowing in the near future, including mortgages. A Licensed Insolvency Trustee oversees this process, which includes evaluating your financial situation, selling your assets, and distributing the proceeds to your creditors.

Bankruptcy and Your Existing Mortgage

Contrary to popular belief, filing for bankruptcy doesn’t mean you automatically lose your home. If you already have a mortgage and are up-to-date with your payments, it is often possible to keep your home. Here’s why: Bankruptcy primarily deals with unsecured debts like credit cards and payday loans. A mortgage is a secured loan backed by an asset, your home. Therefore, bankruptcy doesn’t eliminate your mortgage, and you may be able to retain your home. However, it’s important to have a discussion with your Insolvency Trustee to understand all your options and the implications of each.

Bankruptcy and Mortgage Renewal

What happens if your mortgage term expires during bankruptcy? Will your lender allow you to renew your contract? It’s a complex question, as each lender’s policy differs. However, it’s important to note that your lender would typically prefer to renew your mortgage rather than foreclose, or initiate a power of sale proceedings on your home, as this allows them to continue earning interest. However, if you’ve previously been declared insolvent, some mortgage providers may choose not to renew your mortgage. In such scenarios, you’d need to find a new lender willing to refinance your mortgage, which could be challenging if your credit rating has been negatively impacted by bankruptcy. Please remember that these are broad guidelines and the specifics can change based on individual circumstances and lender policies. For advice tailored to your unique situation, it’s recommended to consult with a financial advisor or a mortgage broker.

The Impact of Bankruptcy on Mortgage Approval

Bankruptcy can significantly impact your credit score, which is an important factor in mortgage approval. Lenders will perceive you as a high-risk borrower, which can make it challenging to secure a mortgage. However, this doesn’t mean it’s impossible. There are several steps you can take to improve your chances of approval. With careful planning and the right approach, securing a mortgage post-bankruptcy is achievable.

Rebuilding Credit Post-Bankruptcy

Rebuilding your credit is an essential step towards securing a mortgage post-bankruptcy. This process takes time, requires patience and discipline, but it’s worth the effort. Here are some steps you can take to rebuild your credit and have a good credit score:

  1. Pay your bills on time: Late payments can have a negative impact on your credit score. Especially after bankruptcy, you can not have late payments. Make sure to pay all your bills on time, including your credit card bills, utility bills, and any loans you may have.
  2. Keep credit utilization low: The amount of debt you have, compared to your overall credit limit, also known as your credit utilization ratio, is another factor that can affect your credit score. Try to keep your credit utilization ratio below 30%.
  3. Don’t apply for new credit too often: Once you obtain your two secured credit cards, stop applying. Each time you apply for credit, it can cause a small, temporary dip in your credit score. Apply for new credit accounts only as needed. Lender do look at number of credit inquiries, and ask about them.
  4. Check your credit report for errors: Errors on your credit report can lead to a lower credit score. Be sure to regularly check your credit report and dispute any errors you find. Make sure that your credit report reflects all debts that were part of the bankruptcy as such. Over time, these actions can help improve your credit score, and make you a more attractive candidate to lenders.

The Road to Homeownership Post-Bankruptcy

While bankruptcy may delay the process of applying for a new mortgage, there are plenty of ways you can increase your chances of approval. You can even use the required wait time to work on improving your chances of getting approved for a mortgage later. Although bankruptcy filings can remain on your credit report for up to 7 years after a discharge, that doesn’t mean you have to wait that long to get a mortgage. While you may qualify with some lenders for a mortgage sooner, it’s usually a good idea to wait 2 years following the bankruptcy, as you’ll likely get access to better terms, including a better interest rate.

Post-Bankruptcy: The Path to a New Mortgage

After bankruptcy, you should get a couple of credit cards to start reporting and rebuilding your credit. In Canada, there are two large credit reporting agencies: Equifax and Trans Union. These agencies are businesses that exist to sell credit information to lenders and consumers. Check with your bank, or a local credit union if they offer secured credit cards. By putting down a security deposit, you increase your chances of getting approved for a credit card. The trick is to have two credit cards with credit limit of $2,500 each. Take the initiative of rebuilding your credit history and the opportunity of a clean slate. Ensure that you stay on top of monthly payments and pay your credit card bill on time, and if possible, in full. By doing this, you’ll rebuild your credit for lenders to take into consideration when you eventually apply for a mortgage. Some prime mortgage lenders will be able to provide you with a mortgage if you are two years clear of bankruptcy. That is, two years from the time you were discharged, not from the time you declared bankruptcy. So, 24 months later, you could potentially build up your credit score to be in a position where some prime lenders will consider your file. If your credit still isn’t up to par, consult with a broker who has experience working with clients with bad credit. If a prime lender is not an option, consider going with an alternative or B-lender mortgage, or even a private lender, if you must, and with a shorter mortgage term of 1 to 2 years, after which you can try applying with a prime lender. Please keep in mind that borrowers with more than one bankruptcy will not be considered by most of the institutional lenders.

Purchasing a Home as a Discharged Bankrupt

Purchasing a home after filing bankruptcy can be accomplished in as little as two years after discharge, assuming a positive credit history has been established, for the same or similar interest rate and down payment as a person who has never filed bankruptcy. However, it’s important to note that the specifics can vary based on individual circumstances and lender policies. Speak with a mortgage broker to discuss your options based on your individual situation.

Working with a Mortgage Broker

Working with a mortgage broker can significantly improve your chances of securing a mortgage post-bankruptcy. A broker can provide you with advice tailored to your specific situation and help you navigate the mortgage application process. Ltd. specializes in assisting individuals with both good and bad credit, including those with past bankruptcy to secure mortgages, by offering personalized advice and solutions. We work closely with clients to understand their unique financial situation and goals, and use this information to match them with the best mortgage options available.


This article is a brief overview of how to obtain a mortgage approval with past bankruptcy. While bankruptcy can pose challenges when trying to secure a mortgage, it doesn’t mean the end of your homeownership dreams. By taking the right steps to rebuild your credit and exploring various mortgage options, you can secure a mortgage after bankruptcy. At Ltd, we understand that applying for a mortgage can be challenging and frustrating. We work closely with many lenders to ensure that our clients receive the most suitable mortgage approvals based on their individual circumstances. As part of that commitment we are constantly upgrading our knowledge about the mortgage products offered by our lenders, and the latest mortgage industry news and trends, so we can provide our clients with the information they need to make informed decisions about their mortgage options.

About Us

At Ltd, we are constantly looking for ways to provide helpful advice related to mortgages, current mortgage rates, and more. If you have any questions or need further assistance, we offer a complimentary no-obligation consultation. Feel free to reach out to us at (519) 252-9665 during our regular business hours. Alternatively, you can fill out our contact form, and your message will be promptly emailed to us. We value your time and inquiries, and we make it our priority to respond to all messages within one business day. When reaching out, please provide us with your contact details, a brief overview of your mortgage needs, and the most convenient times for you to have a consultation. We look forward to assisting you with your mortgage.

This article was brought to you by Ltd., a mortgage brokerage that is licensed with the Financial Services Regulatory Agency of Ontario (FSRA), which regulates businesses in the financial sector. The Principal Broker Sash Trajkovski has over 20 years of real estate and mortgage experience in the Ontario marketplace. You can verify our licenses by visiting the following links from FSRA’s website: our corporate license and Principal Broker license. Our mortgages services are available to all residents of Ontario. If you’re in Ontario and looking for more personalized advice and information, consider booking your Complimentary Consultation today, and let us help you understand the details that will guide you on your path to a suitable mortgage solution.

Disclaimer: Please note that this information is current as of the date of publication and is intended to be general in nature. It is not intended to provide legal, tax, financial, or other professional advice and should not be relied upon as such. Always consult with a professional for advice tailored to your individual circumstances.

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