For many Canadians, the idea of buying a home feels out of reach after declaring bankruptcy. It’s natural to wonder: can you get a mortgage if you’ve been bankrupt in the past? The short answer is yes. Bankruptcy makes the process more challenging, but it does not end your chances of homeownership. With the right timeline, financial rebuilding, and professional guidance, you can still qualify for a mortgage in Canada.
How Bankruptcy Affects Mortgage Approval in Canada
Bankruptcy is designed to give you a financial reset, but it also impacts your ability to borrow money in the future. Understanding how lenders view bankruptcy helps you prepare.
Impact on Credit Score and Borrowing Power
- Credit score damage: Bankruptcy often drops your credit score significantly, sometimes by more than 200 points.
- Credit report timeline: It remains on your record for 6–7 years after discharge (longer if this is a second bankruptcy).
- Borrowing power: With lower credit and bankruptcy history, lenders see you as higher risk, which limits approval options.
A low score doesn’t mean “no mortgage forever.” It simply means you’ll need to take intentional steps to prove your financial reliability.
Why Lenders See Bankruptcies as High Risk
Lenders review past bankruptcies because they represent missed financial obligations. Traditional banks may turn down applications immediately, while alternative or private lenders can be more flexible. The trade-off often comes in the form of:
- Higher interest rates: Lenders offset risk by charging more.
- Larger down payment requirements: You may need 20% or more depending on your profile.
When Can You Apply for a Mortgage After Bankruptcy?
Timing matters. Applying too soon after bankruptcy usually results in rejection. Lenders want to see stability and a record of responsible credit use before considering approval.
Discharge Period and Waiting Times
- First bankruptcy: Most lenders require at least 2 years from the discharge date.
- Second bankruptcy: Waiting periods are typically longer, with stricter lending requirements.
The “discharge” is when you are officially released from bankruptcy obligations. This marks the start of the waiting period before you can apply.
CMHC and Mortgage Default Insurance Rules
If you plan to buy a home with less than 20% down, you’ll need mortgage insurance. The Canada Mortgage and Housing Corporation (CMHC) requires:
- At least 2 years since bankruptcy discharge
- Re-established credit history, with at least two credit accounts in good standing for a minimum of 12 months
Other private insurers may follow similar or slightly more flexible guidelines, but in all cases, proof of stability is essential.
How to Improve Your Chances of Approval After Bankruptcy
Securing a mortgage after bankruptcy is possible if you actively work on improving your financial profile. Here are three key steps:
Rebuild Your Credit Step by Step
Start small and show consistency:
- Open a secured credit card and pay it off monthly
- Take a small personal loan and make regular payments
- Keep your credit utilization low (ideally under 30%)
Even 12–24 months of strong credit activity can demonstrate responsibility to lenders.
Save for a Larger Down Payment
A bigger down payment reduces lender risk and improves your approval chances. Common scenarios include:
- 5–10% down payment: Only possible with strong re-established credit and mortgage insurance approval.
- 20% or more: Often required if you’re applying through alternative lenders.
The more money you can put down, the more confidence lenders will have in your application.
Work with a Mortgage Broker Like Pradip
Mortgage brokers have access to a wide range of lenders, including those open to post-bankruptcy borrowers. By working with a broker like Pradip Maheshvari, you gain:
- Access to alternative lending options
- Personalized advice based on your credit and goals
- A smoother process compared to approaching banks on your own
Frequently Asked Questions About Mortgages After Bankruptcy
Can I get a mortgage with bad credit after bankruptcy?
Yes. Bad credit makes it harder, but not impossible. Alternative lenders often work with borrowers who have scores below 600, provided you can show stable income and a down payment.
Do I need a co-signer to get approved?
Not always. A co-signer can strengthen your application, especially if your credit is still weak. However, some lenders will approve you without one if you have rebuilt your credit and saved a significant down payment.
How much down payment is required post-bankruptcy?
Most lenders prefer at least 20% down if you have a bankruptcy in your history. With re-established credit, you may qualify for as little as 5% down through insured mortgages.
Should I apply right after discharge or wait longer?
It’s best to wait at least 2 years after discharge. Applying too early usually leads to rejection and could further affect your credit score.
Final Thoughts on Mortgages After Bankruptcy
Bankruptcy may feel like a setback, but it doesn’t have to stop your dream of homeownership. With time, disciplined credit rebuilding, and a larger down payment, you can qualify for a mortgage after bankruptcy in Canada. The key is understanding lender requirements and working with the right professionals.
If you’re ready to take the next step, book a free consultation with Pradip Maheshvari and start your journey toward homeownership today.
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