How to Refinance Your Mortgage with Bad Credit?

Refinance Your Mortgage with Bad Credit

In Canada, mortgage refinance is a straightforward process, offering homeowners the chance to secure better terms and save money. However, for those with less than perfect credit, navigating this financial terrain can seem like an uphill battle. While it may present challenges, refinancing with low credit score is not impossible. With the right knowledge and strategy, homeowners can still unlock opportunities to improve their financial situation. Before deep dive into actionable steps and insights to help you refinance your mortgage despite of bad credit, let’s understand the concept of mortgage refinancing.

How does refinancing a mortgage work?

Refinance home loan mortgage essentially means replacing your current mortgage with a new one. This new mortgage typically comes with different terms, such as a new interest rate, loan duration, or loan type. People refinance their mortgages for various reasons, including to secure a lower interest rate, reduce monthly payments, change from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or access equity in their home.

When you refinance your mortgage, you essentially pay off your existing loan with the funds from the new loan. This process may involve closing costs, similar to when you initially obtained your mortgage. These costs can include fees for appraisals, title searches, application processing, and other administrative expenses.

How to refinance mortgage loan with bad credit?

You can pursue refinancing with alternative mortgage lenders even if you have bad credit. Alternative mortgage lenders, also known as B lenders, specialize in working with borrowers who may not meet the strict criteria of traditional lenders such as Big banks. These lenders offer mortgage products tailored to individuals with unique financial circumstances, including those with bad credit.


Alternative mortgage lending solution

Here are some common characteristics and criteria that B lenders may consider when including borrowers:

1. Credit History

  • B lenders are more lenient regarding credit history compared to traditional lenders.
  • They may consider borrowers with past credit issues such as late payments, collections, or bankruptcies.
  • While they may accept borrowers with bad credit, they typically require a minimum credit score, which is often higher than what is required by prime lenders.

2. Income Verification

  • B lenders may accept alternative forms of income verification, such as bank statements, business revenue, or asset-based income.
  • They may consider self-employed individuals or those with irregular income streams who may not meet the strict documentation requirements of traditional lenders.

3. Debt-to-Income Ratio (DTI)

  • B lenders may be more flexible regarding debt-to-income ratios compared to prime lenders.
  • They may consider higher DTI ratios but often have limits to ensure borrowers can afford their mortgage payments.

4. Property Type

  • B lenders may be more willing to finance non-traditional properties, such as rural properties, vacation homes, or properties requiring renovation.
  • They may accept properties that do not meet the criteria of prime lenders, such as unique construction types or properties in need of repair.

5. Loan Amount and Loan-to-Value Ratio (LTV)

  • B lenders typically have maximum loan amounts and LTV ratios, which may vary depending on the borrower’s credit profile and the property type.
  • They may offer higher LTV ratios compared to prime lenders but often charge higher interest rates and fees to offset the increased risk.

6. Interest Rates and Fees

  • B lenders often charge higher interest rates and fees compared to prime lenders to compensate for the increased risk of lending to borrowers with non-conforming profiles.
  • Interest rates may be fixed or variable and can vary depending on factors such as credit score, loan amount, and LTV ratio.

7. Loan Term and Amortization Period

  • B lenders may offer flexible loan terms and amortization periods to meet the needs of borrowers.
  • They may provide shorter loan terms or interest-only payment options, depending on the borrower’s financial situation and objectives.

8. Relationship with Mortgage Brokers

  • B lenders often work with mortgage brokers to originate loans and reach borrowers who may not qualify for traditional financing.
  • Mortgage brokers act as intermediaries between borrowers and lenders, helping match borrowers with the most suitable loan options available.


Refinancing your mortgage with less than perfect credit may present obstacles, but it’s important to remember that it’s not an insurmountable task. By understanding your credit situation, researching lenders and loan options, building equity, and seeking professional guidance, you can increase your chances of successfully refinancing your mortgage on favorable terms. Remember, patience and persistence are key as you work towards achieving your financial goals.

Refinancing Mortgage with offers a solution for individuals who have encountered challenges in refinancing their mortgage through traditional channels. Our team specializes in providing alternative mortgage solutions tailored to borrowers with unique financial circumstances, including those with bad credit, self-employment income, or non-traditional sources of income.

With, borrowers who have been turned away by traditional lenders due to credit issues or other factors can explore refinancing options that may not be available elsewhere. The company’s expertise lies in connecting borrowers with alternative lenders who understand their specific needs and are willing to offer financing solutions that align with their circumstances.

Frequently Asked Questions

Refinancing with bad credit can help lower your monthly mortgage payments, consolidate debt, or access equity in your home for other purposes. It can also improve your credit score over time if you make timely payments on the new loan.

The refinancing process with bad credit can take anywhere from a few weeks to several months, depending on factors such as the lender's requirements, the complexity of your financial situation, and the current market conditions.

Refinancing with bad credit may temporarily lower your credit score due to the credit inquiry and the new loan account opening. However, if you make timely payments on the new loan, it can ultimately help improve your credit score over time.

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