Institutional lenders and banks have strict credit score requirements to qualify individuals for a mortgage. Banks require people to have a credit score of 600 or more if they ever need a mortgage. People with poor credit scores have no choice but to seek a bad credit mortgage since banks will not lend to anyone below 550 points. Our job is to help those rejected by banks by connecting them with private lenders who provide bad credit mortgages in Scarborough, Toronto.
Credit Scores Needed by Various Lenders
- Banks require at least 600 points
- Trust Companies must see a score of at least 550 credit score points
- Bad credit lenders will lend without looking at credit score
How to Verify Your Credit Score
Banks can get your credit score from major Canadian credit bureaus, such as Equifax and TransUnion. Our brokerage firm can also pull your credit score and give it free of charge. You can also request your score from the main bureaus by visiting their websites. If you have a habit of not paying your bills, have been in bankruptcy, or just take on too much debt, you will likely have a poor credit score.
Private Lenders Offering Bad Credit Mortgages in Scarborough
If the copy of your credit score indicates a value below 550, only a private lender might be able to help. Scarborough’s private lenders can offer mortgages despite a client’s credit score. Consumer proposals and bankruptcy quickly disqualify you from bank loans. Still, we have a network of private lenders offering bad credit mortgages to people in Scarborough and other parts of Toronto.
Requirements for Bad Credit Mortgages
Instead of credit, private lenders will consider property debts when deciding on bad credit mortgages. There is an inherent risk in bad credit mortgages, which private lenders mitigate by rejecting applications when the property has too much debt. A lender creates a registered mortgage agreement that gives them the right to sell a property in case of default. When property is sold off to recoup, the first lender is paid first, followed by the next and other lenders.
To judge the actual risk in a particular home, lenders must obtain the LTV or Loan-to-Value ratio. You get property LTV by dividing the total debts in a property by its current price. Bad credit lenders in Scarborough will loan properties with a 75% maximum LTV. You might get better interest rates with a better credit score or higher income, but these are not primary requirements for a bad credit mortgage.
Interest Rates and Fees for Bad Credit Mortgages
A bad credit mortgage is a high-risk investment which carries a higher interest rate than other types. The interest rate would normally be between 3% to 4% for bank mortgages and 8% to 14% for a private lender bad credit mortgage. For private deals, you also have to pay any fees associated with the mortgage. The money is used to pay lawyers, home appraisals and other professionals involved in setting up the loan. To get the best deal, you have to contact several lenders offering bad credit mortgages. We know of several lenders that service Scarborough, and we can send you quotes from several.
How to Boost Your Credit Score
To improve your credit score, you must pay your bills and credit cards on time. To speed up the process, you should make sure to pay pending bills on time. Credit cards are worthy tools for improving credit score, but only if used wisely. All monthly charges must be paid on time, and it is advisable to put small charges that are easier to pay off. Another way to improve your credit score is to request a secured credit card from your bank.
All leading banks in Canada offer secured credit cards, and to get one, you must place a deposit. This is used when credit card fees are unpaid. Experts recommend you stick within 60% of the card’s limit and pay charges in full when you remember. It takes about six months to successfully repair a bad credit score. A good credit score allows people in Scarborough to borrow loans at low interest rates.