Credit scores are used by many mortgage lenders when determining whether or not to provide a mortgage. Banks have to check your credit report in a bid to establish your creditworthiness but unfortunately, that prevents many people from accessing money tied up on their property. Unlike banks, private lenders turn a blind eye on poor credit score to issue bad credit mortgages in Caledon, Ottawa, Mississauga and other parts of Ontario.
Credit Scores Preferred by Various Lenders
- Banks require 600 points or more
- Credit unions will approve for a score of 550
- Private lenders do not check your score
How to Get Your Credit Score
The leading credit reference bureaus in Canada are TransUnion and Equifax. Their primary role is to develop a credit report for each adult citizen based on their borrowing and repayment habits. This information is obtained from lenders who share such information to protect others from serial defaulters. Banks and lending institutions can pull an individual’s credit report to assess the risk associated with them. You can also get a copy free but the credit bureaus will charge you for the service. If you want to avoid such costs, you can contact us to get it on your behalf.
Private Lenders Offering Bad Credit Mortgages in Caledon
Credit score requirements by different lenders clearly show people with bad credit that they can only turn to private lenders in Caledon. The city’s bad credit mortgage lenders do not care much for your credit score. We work closely with a network of such lenders in Caledon and other Ontario cities to help residents access loans against property.
Requirements for Bad Credit Mortgages
Private mortgage lenders in Caledon care more about the equity you own as opposed to your credit report. Calculating the loan to value ratio they can tell how much of the property you own in order to approve or reject your mortgage approval. Borrowers with too much debt secured against their homes are unlikely to qualify because it means that the lender might not get paid in case things go wrong. As the rule says, the first mortgage must be paid before other lenders can get their cut. This means that with too little equity borrowers will not be in a position to repay the debt.
The loan to value ratio is calculated by dividing debts by the appraised price of property. If the result is above 75%, the borrower only has 15% equity in their home, which means that private lenders might not approve their applications. If you have favorable equity and a credit score that is not too far from 550, private lenders will definitely consider charging you less interest.
Fees and Interest Rates
Bad credit mortgages are high risk even for private lenders who resort to charging 8-15% interest. You will also pay appraisal, legal and administration fees required to set up the mortgage as private lenders try to reduce their expenses as much as possible. That said, you must realize that different private lenders charge unique rates in the region and shop around for the one who offers the best terms. We have strong ties with several private lenders in Caledon so you can enlist our help finding the best mortgage product for you.
How to Improve Your Credit Score
People who do not wish to damage their credit scores often turn to secured credit cards. They place a deposit on these cards and make sure that they never spend more than 60% percent of the set amount. This way the bank can simply take their cut from the deposit if you are late on the payment. If you do not have a secured card, you can also improve your score by developing proper habits. Charge small purchases on your card and always pay in full and in time to gradually build your score. Bad credit mortgages may also help you improve these ratings but you must also pay in time as private lenders also report to credit bureaus. It takes a while for the positive actions to reflect on your report but with patience, you will get to the desired 550. It takes around 6 months for changes to take effect and a good report ensures that you can always access credit from preferred lenders.