Institutional lenders and banks have strict credit score requirements in order to qualify individuals for a mortgage. Banks need people to have a credit score of 600 or more if they ever need a mortgage. People with poor credit score have no choice but seek a bad credit mortgage since banks will not lend to anyone below 550 points. Our job is to help those rejected by banks by connecting them with private lenders who provide bad credit mortgages in Scarborough, Toronto.
Credit Scores Needed by Various Lenders
Banks can get your credit score from major Canadian credit bureaus; Equifax and TransUnion. Our brokerage firm can also pull your credit score and give it to you free of charge. You can also request your score from the main bureaus by visiting their websites. If you have a habit of not paying your bills, or have been in bankruptcy or just take on too much debt, it is highly likely that you will have a poor credit score.
If the copy of your credit score indicates a value below 550, only a private lender might be able to help. Scarborough’s private lenders can offer mortgages despite a client’s credit score. Consumer proposals and bankruptcy quickly disqualify you from bank loans but we have a network of private lenders offering bad credit mortgages for people in Scarborough and other parts of Toronto.
Instead of credit, private lenders will consider debts on a property when making decisions on bad credit mortgages. There is inherent risk in bad credit mortgages which private lenders mitigate by rejecting applications when property has too much of a debt burden. A lender creates a registered mortgage agreement which gives them the right to sell a property in case of default. When property is sold off to recoup, the first lender is paid first, followed by the next and other lenders.
To judge the actual risk in a particular home, lenders must obtain the LTV or loan to value ratio. You get property LTV by dividing the total debts in a property by its current price. Bad credit lenders in Scarborough will loan properties with 85% maximum LTV. You might get better interest rates with a better credit score or higher income but these are not primary requirements for a bad credit mortgage.
A bad credit mortgage is a high-risk investment, which obviously carries a higher interest rate than other types. The interest rate would normally be between 3%-4% for bank mortgages and 7%-15% for a private lender bad credit mortgage. For private deals, you also have to pay any fees associated with the mortgage. The money is used to pay lawyers, home appraisal and other professionals involved in setting up the loan. To get the best deal you have to contact several lenders offering bad credit mortgages. We know of many lenders that service Scarborough and we can send you multiple quotes from several lenders.
For credit score to improve you must pay your bills and credit cards. To speed up the process, you should make sure to pay pending bills on time. Credit cards are only worthy tools for improving credit score but only if used wisely. All monthly charges must be paid on time and it is advisable to put small charges that are easier to pay off. Another way to improve credit score is to request a secured credit card from your bank.
All leading banks in Canada offer secured credit cards and to get one you must place a deposit. This is used when credit card fees are unpaid. Experts recommend that you stick within 60% of the card’s limit and pay charges in full when you remember. It takes about 6 months to successfully repair a bad credit score. Good credit score gives people in Scarborough a chance to borrow loans at low-interest rates.