Owning a home in Aurora or leveraging the equity from your current residence can sometimes require looking into unconventional financial options and paths, especially when one’s credit score is not optimal. While banks and many of the major Canadian financial institutions have tight processes and policies in place, such as a minimum credit score requirement of 600 for mortgage applicants, options are available for those who fall below this threshold.
Understanding Bad Credit Mortgages
If credit scores are below a minimum required by the bank, it may be hard to get a traditional mortgage. That is where private lenders jump in and help those clients whose credit scores may not be ‘good enough.’ It is for this category of people that private lenders provide specific mortgages called ‘bad credit mortgages.”.
Determining Your Credit Score
Before delving into bad credit mortgages, it’s essential to know your credit standing. In Canada, two primary credit bureaus – Equifax and TransUnion – maintain and provide credit scores. These agencies collate borrowers’ financial data, which lenders use to decide loan interest rates and approval outcomes. Accessing your credit report is simple: visit the websites of these bureaus and provide the necessary details.
Understanding Lender Requirements
Different lenders have varied credit score benchmarks:
- Banks typically insist on a score of 600 or above.
- Trust companies and credit unions often set their minimum at 550.
- Private lenders, on the other hand, don’t rigidly adhere to any minimum credit score requirement.
Exploring Bad Credit Lenders in Aurora
Mainstream financial institutions, like banks, may be out of reach for individuals with credit scores below 550. That is where a company like Mortgage Broker Store fills the gap. Our network of private lenders in Aurora can offer financing arrangements regardless of credit score and often extend loans to past bankruptcies. Unlike traditional banks, our lenders are flexible with how the loaned funds are to be used-be it renovations at home, education fees, or for personal needs.
Interest Rates and Associated Costs
If traditional banks provide mortgage interest rates in the range of 2.7% to 4%, private lenders will certainly charge 7% to 14% due to the high risk of providing funds to bad credit borrowers. Furthermore, the preparation of this type of mortgage implies the need to pay additional brokerage fees for legal, appraisal, and administrative services in the amount of 3% to 6% of the total loan value.
Boosting Your Credit Score
Your credit score will always be improved in some way. Practice good management of your card: Pay off the full balance every month, don’t let balances exceed 60% of your credit limit, use secured credit cards that ask for deposit collateral, older accounts keep a better record, fewer credit checks/hits will help improve this score over time. It takes these continued steps of credit-building actions to develop an increasingly higher score for a broader financial future.
Criteria for Bad Credit Mortgage Approval
Private lenders in a bad credit mortgage apply mainly based on the value of the property. They determine the Loan to Value, which is the ratio of debts over the current market price of the house. Typically, an LTV of less than 75% dictates a good chance of approval. This value-based consideration ensures that if there were a default, the private lender would recover their money in case they had to sell the home.
Bad Credit Mortgage Solutions in Aurora with Mortgage Broker Store
With over a decade of experience in Ontario’s real estate sector, Mortgage Broker Store boasts a robust network of lenders, including those specializing in bad credit mortgages. Our expertise can guide you through the maze of options, ensuring a solution tailored to your financial landscape. Additionally, as private lenders ourselves, we can present alternative financing avenues if needed. To understand bad credit mortgages better, discover eligible lenders in Aurora, or connect with our team for a free consultation, reach out to Mortgage Broker Store.
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. We work with Ontario private lenders, guiding you through crucial decisions in the lending process.
- Introduction
- Understanding Bad Credit Mortgages
- Determining Your Credit Score
- Understanding Lender Requirements
- Exploring Bad Credit Lenders in Aurora
- Interest Rates and Associated Costs
- Boosting Your Credit Score
- Criteria for Bad Credit Mortgage Approval
- Bad Credit Mortgage Solutions in Aurora with Mortgage Broker Store