So, you experienced financial setbacks, but now you are on the right track. However, your bank keeps turning down your mortgage loan applications because of your pesky credit history. All Canadian banks and credit unions approve mortgages only after they review and verify that a client’s credit score is high enough (550 or greater). If you have a low credit score, it’s obvious that you can’t get a mortgage from the top lenders. But there’s no need to worry, as there are individuals and institutions offering bad credit lending, and we’re here to help you find bad credit mortgage lenders in Peterborough.
What Are the Credit Scores Required by Different Lenders?
- Major banks (prime lenders): Typically require a credit score of 600 to 900
- Trust companies (bad credit institutional lenders): Look for credit scores of 550 to 700
- Private lenders: Accept any credit scores but mostly serve clients with a rating that’s less than 600
How to Check Your Credit Score
If you have ever borrowed money to buy a house/ car or applied for a credit card/ any other loan, you are free to access your credit score. In Canada, credit scores are generated by two credit bureaus: Equifax and TransUnion. Your score ranges from 300 to 900 and shows lenders how you have been dealing with credit in the past years. To obtain a copy of your credit report, you can visit the official websites of any of the two credit bureaus. Alternatively, you can always contact us and let our brokerage pull your credit score. We will then provide you with a copy.
Private Lenders for Bad Credit Mortgages in Peterborough
When you receive a copy of your credit score and realize that your score is less than 550, private lenders can help you get a bad credit mortgage. These are individuals/companies that offer loan funds backed by real estate properties, specializing in people who don’t have ideal credit scores. We have a network of private bad credit lenders in Peterborough who can provide you with bad credit mortgages regardless of your credit score.
Requirements for Private Lender Mortgages
The key factors determining approval for a bad credit mortgage by a private lender include property type, value, and existing debts. The mortgaged property has to be in good condition, and the existing debts shouldn’t be too much.
A strict appraisal is always performed before a client can be approved. After finalizing a mortgage agreement, lenders retain the right to sell the house if mortgage payments are refused. Upon the property’s sale, the lender settles the previous mortgage holder and recovers their funds.
When determining the down payments, the private lender will have to judge the risk of your property by calculating its Loan-to-Value (LTV). This is achieved by dividing the value of your existing secured debts by the estimated selling price of the property. Peterborough’s bad credit mortgage lenders lend on properties with a minimum LTV ratio of 75%. This means that you’ll have to make a down payment of at least 15% to be approved. If you can make a higher down payment, you should do so. Private lenders take this as a sign that you’re able to keep track of your personal finances.
Interest Rates and Fees for Bad Credit Mortgages in Peterborough
Bad credit mortgage rates range from 8% to 12%, which is higher than the bank rates of 3% to 4%. Private lending is a riskier investment, hence the higher interest rates compared to bank mortgage rates. As a client, you’ll also incur additional fees for setting up the mortgage, including administrative fees and property appraisal fees.
All these charges can be financed through a mortgage loan, which is advantageous for borrowers. For the best deal, contact multiple lenders offering bad credit mortgages in Peterborough, Ontario, and compare their rates. Our Peterborough private lender network ensures multiple quotes for easy selection based on your preferences.
How to Repair Your Credit Score
If your score is lower than expected, verify the accuracy of information on your credit report first. Review the report for accuracy and identify factors that could negatively impact your credit score.
You then need to start working on how to improve them. The only way to repair your credit score is to adopt good credit practices, which include:
- Paying your bills/ credit cards on time
- Making payments as quickly as possible (before the due date)
- Pay bills in full or pay at least the minimum required amount before the due date
- Reducing the number of credit card applications
- You shouldn’t go over the credit limit on your credit card
- Ensuring that you have a credit history so as to avoid low scores due to lack of credit history
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.