Mortgage After Bankruptcy: Your Path Back to Homeownership

You went through bankruptcy two years ago—medical bills, job loss, divorce, or just circumstances that spiraled. Now you're back on your feet and wondering: will anyone ever give me a mortgage again? The answer is yes—but the path requires patience, planning, and the right approach.

The Bankruptcy Timeline

How bankruptcy affects your mortgage eligibility:

During Bankruptcy

• Cannot obtain new credit
• Mortgage applications will be declined
• Focus on completing bankruptcy requirements

After Discharge

Discharge date is when your bankruptcy officially ends. From there:

Credit Report Impact

Bankruptcy stays on your credit report:

• First bankruptcy: 6-7 years after discharge (varies by province)
• Second bankruptcy: 14 years after discharge

Rebuilding Your Credit

Start immediately after discharge:

Step 1: Complete Bankruptcy Requirements

Before focusing on credit:

• Completing credit counseling requirements
• Getting your discharge

Step 2: Start Rebuilding Credit Immediately

After discharge, begin rebuilding:

Secured Credit Card:

• Deposit $500-$1,000 as collateral
• Use it monthly, pay in full
• Builds payment history

RRSP Loan:

• Small loan ($1,000-$2,000) to RRSP
• Payments report to credit bureau
• Double benefit: credit + savings

Credit-Builder Loan:

• Offered by some credit unions
• Designed specifically for rebuilding
• Reports positive payments

Step 3: Establish Two Trade Lines

Lenders want to see:

• Minimum 2 credit accounts
• At least 12 months of history
• Perfect payment record
• Reasonable utilization

Step 4: Save for Down Payment

Post-bankruptcy mortgage often requires:

• 10%+ down payment (more is better)
• Some lenders require 20%+
• Shows financial recovery

Step 5: Stabilize Employment

Lenders want to see:

• Stable employment history
• 2 years in same industry ideal
• Consistent income

Lender Options by Timeline

Years 0-2: Private Lenders

If you need a mortgage very soon:

• Private lenders may consider you
• Expect rates 8-15%
• Larger down payment (20-35%)
• Shorter terms (1-2 years)
• Clear exit strategy required

Years 2-3: B-Lenders

Alternative lenders become options:

• Rates 5-8%
• Down payment 10-20%
• More flexibility on credit
• Term options 1-5 years

Years 3+: A-Lenders

Prime lenders become possible:

• Must have rebuilt credit (650+)
• Stable employment
• Adequate down payment
• May still have some restrictions

What Lenders Look For

Positive Signs:

✅ Perfect payment history since discharge
✅ 2+ credit accounts in good standing
✅ Stable employment
✅ Savings demonstrating financial responsibility
✅ Reasonable explanation for bankruptcy
✅ Changed circumstances (divorce resolved, health recovered, etc.)

Red Flags:

❌ Missed payments since discharge
❌ No credit rebuilding efforts
❌ Unstable employment
❌ Same financial patterns that led to bankruptcy
❌ Recently discharged with no track record

The Explanation Letter

Lenders will ask you to explain your bankruptcy. An effective letter includes:

1. What happened (job loss, medical emergency, divorce, business failure)
2. What changed (new job, health recovered, situation resolved)
3. What you've done since (rebuilt credit, saved money, stabilized life)
4. Why it won't happen again (changed circumstances, lessons learned)

Be honest and take appropriate responsibility while highlighting positive changes.

Special Programs and Considerations

CMHC After Bankruptcy

CMHC may insure mortgages for discharged bankrupts:

• 2+ years post-discharge
• Rebuilt credit demonstrated
• Case-by-case basis

Credit Union Flexibility

Some credit unions:

• Consider your full story
• May work with you sooner
• Relationship banking matters

Co-Signer Options

A strong co-signer can:

• Help you qualify earlier
• Access better rates
• Reduce lender risk

FAQ

Q: Can I get a mortgage while in bankruptcy?
A: No. You must be discharged first.

Q: How long after discharge can I apply?
A: Theoretically immediately, but realistically 2+ years for reasonable options.

Q: Will I always pay higher rates?
A: No. Once you've fully rebuilt and the bankruptcy falls off your credit report, you can access normal rates.

Q: Does consumer proposal vs bankruptcy matter?
A: Consumer proposals are sometimes viewed slightly more favorably, but both require rebuilding.

Q: Can I use a mortgage to rebuild credit?
A: Yes, once you qualify. A mortgage with perfect payments significantly boosts credit.

Q: What if my bankruptcy was recent?
A: Start rebuilding now. Every month of positive history helps.

What's Next

Bankruptcy is a chapter, not the whole story. Connect with our team to create a personalized plan for your path back to homeownership. We'll be honest about your timeline and help you maximize your recovery.