Banks and institutional lenders have strict credit score requirements before they can approve loans. Most banks require 600 credit score points or more to give a mortgage. People with a credit score below this point have no choice but to seek bad credit mortgages as the banks will not listen. Our company helps residents find private lenders that provide bad credit mortgages in North York and other neighbourhoods in Toronto.
Credit Score Requirements by Various Lenders
Banks can pull the score from leading credit bureaus, TransUnion and Equifax. Our mortgage brokers can also pull your score and hand it to you free. If you like, visit the credit bureaus’ websites to pay for a recent copy. Not paying bills, taking too many debts or having been in bankruptcy means that you most likely have a poor credit score.
If your credit score shows that you have below the required 550 points, you have to find a private bad credit mortgage lender. In North York, they are ready to extend you a loan with bad credit. You will be rejected for bank loans with a consumer proposal or having been bankruptcy but bad credit mortgage lenders do not mind. We have a network of private lenders who exclusively offer bad credit mortgages in North York.
They do not look at credit but rather the existing debts on a property when making a lending decision. There is an inherent risk in bad credit mortgages which is why private lenders avoid property with too much debt. Lenders use a registered mortgage agreement which gives them power to sell a property in default. The first mortgage lender is always first to recoup after a power of sale, followed by the second, and third bad credit lender.
To really gauge your worth as an investment, the private lenders consider equity in a property as opposed to the borrower’s credit score as banks do. They have to calculate a value known as loan to value (LTV) ratio by dividing total debts by the appraised price of the home. Bad credit lenders in North York loan properties with 85% maximum loan to value. If you have a slightly good credit score and high income, then you have better chances of getting good interest rates on your loan.
This is a high-risk investment involving individuals who fail to honour their debts. Private lenders charge extremely high-interest rates on loans compared with banks. While banks issue mortgages at 3%-4% the private lenders of bad credit mortgages will loan for 7%-15% interest. The client is also required to pay any fees for the mortgage set up including payment of broker’s and lender’s staff, appraisal, real estate lawyers among other professionals. To get the best terms and conditions on the loan it is important to contact multiple lenders. We already have many in our private lender network and can send multiple for your consideration.
It is possible if you pay bills and credit card debt religiously. The credit score will improve much faster if you make a habit of paying on time. Credit cards are great tools to help in building a credit score but you have to pay monthly charges on time and make small charges, which are better manageable. Another way to improve your credit score is by requesting a secured credit card from your bank.
All leading banks in Canada can issue you a secured credit card after you have made a deposit. This amount will be kept in escrow to use when you miss credit card payments. For a secured card to work in your favour, never exceed the 60% limit and make sure you pay all credit card debts when you can. Efforts to improve credit score will bear fruit after 6 months of paying bills in full and on time.