Big Canadian banks can only approve a mortgage when a person has a good credit score. Without a good credit score, a bank mortgage is out of the question and you will need alternative funding. We specialise in getting our clients bad credit mortgages in Oakville.
Credit Scores Needed By Various Lenders
- Banks in Canada need a credit score of at least 600
- Trust companies in Canada need a credit score of at least 550
- Private lenders need to see home equity and can approve at any credit score
Banks are not able to negotiate with you at all if you do not meet their strict credit score requirements. Private lenders are generally open to negotiation and can work with people whom the banks reject. We specialise in connecting our clients with private lenders that provide bad credit mortgages in Oakville.
Retrieving Your Credit Score Report
Companies that offer mortgages are able to retrieve credit score reports from Equifax and TransUnion, Canada’s largest credit bureaus. Our company can also create these credit reports and we can provide them for free upon request. Another option is to visit the websites of Equifax and TransUnion and request your credit report via an online form. A person is likely to have a poor credit score if they take too much debt, if they don’t pay bills, or if they’ve gone through bankruptcy or consumer proposal.
Private Lenders Offering Bad Credit Mortgages in Oakville
A poor credit score means that private lenders are your only option for a mortgage. These lenders lend on homes in Oakville regardless of credit score. Private lenders also deal with people who have gone through bankruptcy and consumer proposal. We have built up a large network of private lenders that lend in Oakville and the rest of Ontario.
Bad Credit Mortgage Approval Criteria
In order to decide if a property is a good investment, the lender will check the mortgages registered on the property and the expected selling price of the property. Properties that have too much money in existing mortgages are not eligible for a mortgage with a private lender. A private lender may sell a property if the homeowner goes into default for more than two weeks. After a property has been sold, the lender may take back their money once the prior mortgage holders are paid off. In some cases, a private lender can lose money if all the proceeds from the home sale go to prior mortgage holders. Lenders measure the risk level of a deal by looking at the property’s Loan to Value (LTV) ratio. Most Oakville lenders are able to lend on properties that have a maximum LTV of 75%. Private lenders are negotiable and can offer a better rate if you can show a high income or other positive features on the property.
Bad Credit Mortgage Costs Explained
Bad credit mortgages have additional costs when compared with bank mortgages. As is standard with risky investments, bad credit mortgages carry higher interest rates than most bank loans. Bank mortgages offer interest rates as low as 2% to 4% while a private lender mortgage will have interest rates from 7% to 15%. Private lenders also have extra fees which need to be paid to process the mortgage. A private lender will take a fee to pay their staff and legal team as well as order a home appraisal on the property. Our team can clearly explain each individual cost and suggest the cheapest method of setting up the mortgage.
How to Increase Your Credit Score
Credit scores will increase over time for people who consistently pay all credit cards and bills. You can easily increase your score by only putting small charges on your card and paying them off entirely. An extremely safe way to improve credit is to ask your bank for a secured credit card. A secured card requires an initial deposit which is used as payment when fees are left unpaid. It is a best practice to stay under 60% of the card’s credit limit. It will take six or more months to fully repair your credit score.