Bad credit mortgages in Thornhill are loans used for the purchase of a home by am applicant whose credit rating is below banks’ standard credit requirements. The people who need these types of mortgages are those whose credit may be challenged for one reason or another. Perhaps they recently went through a divorce, filed bankruptcy previously or have simply accumulated some credit card debt. Our team has connections with private mortgage lenders that can provide bad credit mortgages in Thornhill.
In Canada, credit scores are generated and produced by the credit bureaus Equifax and TransUnion. Anyone can access their own credit scores, but so can lending institutions, insurance agencies, utility companies and any business that extend credit like gas stations and department stores. Anyone can get a copy of their own report by requesting it from the credit bureaus’ websites.
Private mortgage lenders are individuals or companies that generate profit by lending their money via registered mortgages. There are a lot of people who do not happen to meet the high credit standards that banks require to be met in order to approve a loan. These lenders mostly service people who have been turned away by banks. Private lenders use the equity in the home as collateral, securing the loan in order to protect them in the case of non-payment. This allows them to be lenient with their lending criteria in ways that accommodate the people who just need a bad credit mortgage.
The biggest requirement that private lenders have when issuing a bad credit mortgage in Thornhill is the Loan to Value ratio. A loan to value ratio is the home’s mortgages divided by its selling price. That means the ration for a house that is worth $200,000 with $100,000 worth of debt has a ratio of 50%, or $100,000 worth of equity in the property. Private lenders will lend up to 85% Loan to Value on a property. That means that in this case, the most that a lender would lend on the example home is $70,000, leaving the remaining 15% of the equity untouched as security.
When acquiring a bad credit loan, the interest rates are higher than a traditional bank’s interest rate would be. Private lenders charge between 8% and 15%, depending on the investor and the applicant’s credit situation. The reason their rates are higher is because the risk they are taking is higher. The credit scores are ignored, but the lender will closely look at the debts secured against the property and the property’s selling price. In addition to slightly interest rates, you will also be required to cover additional expenses such as lawyers, inspectors, home appraisers and other third party vendors whose services may be necessary in order to facilitate the mortgage. Most of these expenses can be added to the mortgage amount so that the borrower does not have to pay upfront.
There are various ways that people can improve their credit score. Most importantly, pay your bills on time. This creates a proven track record that you are appropriately handling your finances and capable of repaying debt. Additionally, remove any mistakes on your credit file that may be damaging. Credit cards are a great tool for repiring credit when used responsibly. By only putting small charges on the card, it will be easy to pay off. Generally credit scores take a minumum of three months time to improve.