Bad Credit Mortgages in Ontario
There are different types of lenders in Ontario, all of whom serve clients based on their credit score. Trust companies and banks will not lend to people who score worse than 550. In Ontario, you can find private lenders that focus on providing bad credit mortgages.
What are the Credit Score Requirements for Different Lenders?
- Banks in Canada need to see 600+ points
- Trust companies need 550 or more
- Private lenders can overlook the credit score
How to Check Your Score
Credit scores in Canada are calculated by TransUnion and Equifax – the two leading Canadian credit bureaus. Anyone can go to these lenders and request their credit report or you may contact Mortgage Broker Store to get one for free. People who have undergone bankruptcy and those who often take more than they can repay are likely to have a low score which means they cannot access credit from institutional lenders.
Private Lenders for Bad Credit Mortgages in Ontario
With scores below 550, you have to find a private lender that offers mortgages to people with poor credit. Banks will turn down anyone with a consumer proposal or bankruptcy but private lenders may still be able to provide financing. We have a vast network of lenders in Ontario who cater to people with bad credit but have homes to act as security.
Bad Credit Mortgage Approval Criteria
Private lenders are more interested in equity than credit score. Bad credit mortgages have a higher risk of defaulting, and private lenders try to reduce their risk as much as possible. Private lenders are able to issue registered mortgages so that they can sell the property if the owner defaults. Should this happen the lender may recoup their investment after prior mortgage lenders have been paid out. This means that for them to lend, you must own enough equity for them to recover their investment after the prior mortgage lenders have been paid. Private lenders assess risk by calculating Loan to Value ratio which shouldn’t exceed 80%. If you have enough equity, regular income, and a reasonable credit score you can negotiate better interest rates with your lender.
Fees and Rates for Bad Credit Mortgages
Bad credit mortgages attract high-interest rates since they are risky investments. Banks lend to people who are unlikely to default which is why they can offer interest rates between 3 and 4% while private lenders charge anywhere from 7-8% in interest. In addition, private lenders require borrowers to pay home appraisers, lawyers and other professionals involved in the mortgage set up. To get the best terms, a borrower must take the time to locate lenders offering affordable interest rates and fees. Mortgage Broker Store has a large pool of bad credit lenders serving people with poor credit in Ontario. These lenders compete with each other to give clients the most competitive terms.
Repairing Your Credit Score
If you don’t pay your bills and credit cards, chances are that you have a bad credit score. Traditional lenders do not factor in emergencies and will therefore not alter terms to accommodate your needs. The moment you miss a payment or fail to pay in full, banks and credit unions report missed payments to Equifax or TransUnion. This will gradually decrease your credit score leaving you with no choice but to deal with private lenders.
A secured credit card can be used as a tool to improve credit, as a deposit can be used to pay any missed payments. If you would rather rely on your regular card, avoid charging large amounts to it so that you can afford to repay.