All Canadian banks require a high credit score before approving you for a mortgage. Banks and credit unions require a minimum credit score of 550 to qualify for a mortgage. People with poor credit scores cannot go to institutional lenders and must turn to bad credit lenders. We help connect our clients with bad credit with bad credit mortgage lenders in Ottawa.
Credit Scores Needed by Various Lenders
- Banks need to see a credit score of 600 or greater
- Trust companies need to see a credit score of 550 or greater
- Private lenders don’t use credit score when approving mortgages
Checking Your Credit Score for Bad Credit Loans
Banks can request your credit scores from Equifax and TransUnion, Canada’s top credit bureaus. Our team also credit reports for free and can give you a copy, or you can request your scores directly from the credit bureaus’ websites. When you fail to pay bills, go into bankruptcy or routinely take more debt than you can pay, your credit score decreases.
Bad Credit Lender Mortgages in Ottawa
When you’ve verified that your credit score is worse than 550, only a private lender can provide bad credit mortgages for you. The bad credit lenders that service Ottawa can provide mortgages regardless of credit score. Two actions that can negatively impact your score are consumer proposals and bankruptcy, and these will cause you to be disapproved for bank mortgages. Our private lender contacts offer bad credit loans in Ottawa and most other Ontario cities.
Criteria for Mortgage Approval
Private lenders will not look at credit to approve a mortgage. Instead, they will examine the existing property debts and the sales value. Private lenders are sensitive to risk and will not provide a mortgage when a property has too much existing debt. Lenders create registered mortgages on properties, letting the lender sell the property if the borrower does not pay the mortgage off. After a property is sold, the lender can recoup their money after previous mortgage holders are paid off.
When evaluating the risk of a property, the private lender will measure that property’s Loan-to-Value (LTV) ratio. When calculating an LTV ratio, you must divide the existing secured debts by the selling price of the property. Ottawa bad credit lenders can lend on properties with up to 80% LTV. Higher annual incomes and credit scores can help get better interest rates but are not needed for mortgage approval.
Fees and Rates of Bad Credit Mortgages
Bad credit mortgage lenders will charge a higher rate than a bank to compensate for the high level of risk in this type of investment. Traditional bank mortgages charge an interest rate of around 3% to 4%, and bank credit lenders charge rates between 8% and 12%. Bad credit lenders also require paying fees to set the mortgage up. The lender and their lawyer will request payment for processing paperwork and a fee must be paid to a home appraisal company. Doing comparison shopping to compare the rates and terms of the different lenders will help you to get the best deal. We have a network of private lenders operating in Ottawa and can give clients several offers for bad credit loans in Ottawa.
Gradually Improving Your Credit Score
You must consistently pay off bills and credit cards to improve your credit score. Your score will increase quicker if you are always on time with your payments. Credit cards can be used to pay off bills and improve your credit score in the process. Putting a small amount on the card each month will make it easy to pay off. A simpler way to improve credit scores would be to get a secured credit card from a bank.
Every large bank in Canada can give you a secured credit card. Before getting the card, you must deposit money that will be used when an overdue payment is generated. It is best practice to pay off all charges and not exceed 60% of the credit limit. If you are consistent with your payments, your credit score will increase in around six months.