We all work very hard to pay down the principal on our mortgages. In fact, of all the debt obligations that Ontarians owe, paying down housing costs in addition to the monthly mortgage payment is overwhelmingly made the first financial priority.
Homeownership comes with a particular pride. To manage our biggest asset, many of us are finding it increasingly challenging to meet all other debt obligations. Despite the financial squeeze for many, it is still very rare for Ontario homeowners to fall into mortgage arrears.
Are You a Homeowner in Ontario Struggling to Afford Housing Costs?
If you have been finding it difficult to meet all monthly liability payments and comfortably cover your mortgage, there are lending solutions in Ontario that will enable you to tap into your existing equity to free up funds in the form of a second mortgage on your home.
Are You an Ontario Homeowner with Bad Credit?
Even for those Ontario homeowners who may have damaged credit, lending options exist.
There are many well-established and experienced private lenders in Ontario who will be able to offer second mortgage loans despite bad credit by basing mortgage financing on criteria that go beyond credit and income as the main approval criteria.
Types of Lenders in Ontario
Throughout the province, Ontario homeowners have a wide selection of lenders to help with refinancing options and negotiating second mortgages. In the mortgage sector, lenders are further classified into three broad categories and mortgage approval is largely determined by the level of creditworthiness of a borrower:
- A lenders- These lenders are made up of major banks. Banks expect borrowers to have very strong credit and substantial, easy-to-calculate household income. Lenders subject borrowers/homeowners to tough mortgage stress tests, making it harder to secure second mortgage financing.
- B Lenders- These lenders comprise credit unions and trust companies. These lenders will also expect fairly strong credit (generally a credit score of 550 and above). B lenders also prefer significant, straightforward household income.
- C Lenders- If credit is an issue, private lenders are widely available for Ontario homeowners. While both A and B lenders will weigh mortgage financing heavily on the amount of income, type of income, and overall creditworthiness, a private lender can look beyond this narrow criterion and base mortgage financing on broader criteria.
Ways to Improve Your Credit for Future Mortgage Loans
Poor credit will not prevent you from securing second mortgage financing through an Ontario-based private lender. Boosting your credit score enhances mortgage options, providing advantages for homeowners seeking diverse loan opportunities.
A few key ways to achieve this include:
- Pull a recent credit report and be very familiar with the report as well as your current credit score.
- Make timely payments on all debts, even minimum amounts, to prevent further credit rating declines.
- Try to pay off high-interest debt first, such as credit card debt.
- Avoid major financial changes when considering a second mortgage, like job changes or taking out personal loans.
What Factors Do Private Lenders Consider When Considering a Bad Credit Mortgage?
To determine mortgage eligibility and terms, private lenders evaluate property value, existing equity, home condition, and location. Ontario private lenders expect to see more than $70,000 of existing equity to lend out second mortgage financing.
These lenders will assess a current home appraisal very carefully to determine the overall risk of the mortgage loan based on where the property is located and whether there are any ongoing issues to be addressed, such as water damage or foundation problems.
Conversely, any updates and renovations will help determine the loan amount. C lenders will also assess the overall Loan-To-Value of your property (LTV). Generally, a private lender will lend up to 75% of the appraised value of your home (75% LTV). For properties in outlying areas, the LTV will not be as high (generally up to 65% of the appraised value or 65% LTV).
Rates and Fees Charged by Private Lenders
Banks prioritize strong credit and household income when calculating criteria for second mortgage financing for borrowers or homeowners. A bank can offer competitive rates on most second mortgage loan arrangements.
Private lenders may charge higher rates and fees to cover costs, but they can still provide loans despite poor credit. To help mitigate risk, the rates will reflect the borrower’s financial reality.
Most private lenders charge between 7% and 12% mortgage rates, depending on the unique financial circumstances of the homeowner. Fees to offset private lender costs range from 3% to 6% of the total loan amount.
Mortgage Broker Store Can Help an Ontario Homeowner with Any Second Mortgage Loan Needs
Mortgage Broker Store can help connect an Ontario homeowner to an appropriate private lender to meet home equity loan needs. Continually strive to find the best match when looking at your particular mortgage and financing goals.
- Introduction
- Are You a Homeowner in Ontario Struggling to Afford Housing Costs?
- Are You an Ontario Homeowner with Bad Credit?
- Types of Lenders in Ontario
- Ways to Improve Your Credit for Future Mortgage Loans
- What Factors Do Private Lenders Consider When Considering a Bad Credit Mortgage?
- Rates and Fees Charged by Private Lenders
- Mortgage Broker Store Can Help an Ontario Homeowner with Any Second Mortgage Loan Needs