Getting a bad credit mortgage in Vaughan is more common than you might think. A bad credit mortgage is simply a mortgage provided to a borrower who is deemed to not have ‘good credit’. Many would-be homeowners in Vaughan, Ontario will need to consider getting a bad credit mortgage if they wish to own a condo or house in the city. They will likely be denied a regular mortgage from a bank.
Since the mid-2010s, most banks and other major financial institutions in Canada have instituted increasingly stringent requirements to approve mortgages and other loans.
If you want to get a mortgage to buy a home in Vaughan, banks and other traditional lenders will have strict credit score and income requirements just to be considered for a mortgage.
Credit Score Requirements for Different Mortgage Lenders in Vaughan
- Banks in Canada require a credit score of at least 600
- Trust companies in Canada require credit scores of at least 550
- Private lenders do not require a particular credit score to approve a mortgage
The majority of Canadian banks require a high credit score when approving mortgage applications. Without a credit score of at least 550 out of 900, banks and credit unions will not approve a mortgage. They will also hesitate to lend to borrowers who are not salaried employees, and they will require at least 2 years of income verification.
Even if you adhere to these requirements, there is still a good chance your mortgage application will be denied. In fact, most loan requests to these lenders are. Borrowers who are turned away in these circumstances are not completely out of luck, they still have options, they can work with private lenders in Vaughan to get a bad credit mortgage.
Mortgage Broker Store specializes in providing bad credit mortgages in Vaughan from private lenders. With our help, you can find lenders who can work with you to get the mortgage needed to own the home of your dreams, regardless of your credit score. Fill out a form on this website to explore your options.
Checking Your Credit Score
Your lenders will retrieve a copy of your credit report when you apply for loans. If you want to check your credit score, you can get it directly from Canada’s two main credit bureaus, Equifax and TransUnion, by going on their websites.
Obtaining a Copy of Your Credit Report
Many mortgage lenders such as banks can produce copies of your credit score upon request. You can get a copy from TransUnion or Equifax by submitting the request forms on their website. Our team at Mortgage Broker Store can also retrieve copies of credit score reports, and provide them on request, free of charge.
How to Improve Your Credit Score
To improve your credit score, you will need to prove that you can responsibly manage money loaned to you. Taking on small amounts of debt will make it easier to keep up with payments. Here are some other things you can do to improve your credit score:
- Paying off all bills and credit cards on time each month
- Using no more than 60% of your available credit limit
- Paying off small loans
- Increasing your credit history
- You can put only small charges to pay off on your credit card, or you can obtain a secured credit card from your bank.
- Using a secured credit card, so your initial deposit is used when the card’s fees are not paid
- Limit how often you apply for loans
You can expect your credit score will improve after consistent payments are made for a minimum of six months.
Bad Credit Mortgages in Vaughan from Private Lenders
If you have a credit score below 550, your only option is to get a bad credit mortgage in Vaughan from a private lender. Vaughan’s private lenders can approve mortgages with any credit score. They also serve people who have undergone bankruptcy and consumer proposal.
Bad Credit Mortgage Requirements in Vaughan
Private lenders offering bad credit mortgages have some requirements that need to be met in order to provide funds.
To determine which borrowers, get their bad credit mortgage application approved, private lenders will calculate the Loan to Value (LTV) of the property the mortgage or loan is being applied for. The LTV is calculated by dividing the value of any loans attached to the homes by the home’s market value.
Getting a $700,000 mortgage on a $1,000,000 home in Concord will create an LTV of 70%.
Private mortgage lenders can provide bad credit mortgages for homes in Ontario with an LTV no greater than 75%, meaning that borrowers in Vaughan should expect to have a down payment of at least 25% before applying for a bad credit mortgage. These requirements are also valid for current homeowners looking for home equity loans or lines of credit
Having a high income and credit score may help you negotiate lower interest rates but these are not needed to get approved.
Understanding the Costs of Bad Credit Mortgages
Most banks will offer lower interest rates than private lenders. Since private lenders are willing to work with riskier borrowers than banks, they charge higher interest rates to cover the additional risk.
Banks offer interest rates ranging from 3% to 6% and private lenders offer rates ranging from 7% to 14%. Private mortgage lenders also charge fees for creating the mortgage. Private mortgage lenders in Vaughan need to pay their lawyers and staff for administering the mortgage, as well as an appraiser to determine the market value of the property.
The Ontario Mortgages Act gives lenders in the province the legal right to sell the property of their borrowers if the mortgage is declared in default. This occurs when payments are not made. Even a single late or missed payment can trigger this process, although most lenders will wait for multiple missed payments before declaring the mortgage in default.
Why People Move to Vaughan
Vaughan, Ontario is one of North America’s most vibrant and livable cities. Home to one of Canada’s most advanced hospitals, the country’s largest amusement park, one of the largest malls, as well as an abundance of educational opportunities and public parks, Vaughan is a fun and exciting place to call home, and it is viewed as a go-to destination to start a family.
There are many reasons why someone might want to live and own a home of their own in Vaughan. The only problem is that in recent years, most banks and other financial institutions have had to tighten their lending requirements, making it significantly harder for the average Canadian to secure mortgages and other loans.
How to Find Private Lenders for a Bad Credit Mortgage in Vaughan
With a growing population, strong economy and infrastructure projects like Metrolinx creating additional educational and employment opportunities, Vaughan offers new residents a thriving community poised for further growth. If you are looking to buy a house or a condo in Vaughan, there is a good chance your mortgage application will get turned down by a bank. But that doesn’t mean your hopes for owning a dream home in Vaughan are over. Our brokers at Mortgage Broker Store can help you find eligible private lenders in Vaughan who can work with you to get a mortgage, regardless of whether you have bad credit or not.
At Mortgage Broker Store we have been working in Ontario’s real estate industry for over a decade, and during that time we have built relationships with hundreds of private lenders across Ontario. If you want to get a bad credit mortgage in Vaughan, fill out a form on this website or call us at (416) 499-2122 to get a free real estate consultation. We can use our connections to find and negotiate with private lenders and get the best bad credit mortgage possible. We are also direct private lenders as well, so if there are no good deals available, we may be able to offer you a mortgage.
Owning your dream house or condo in Vaughan is within your reach. Banks may be of no help, but you have other options that can help you achieve your home ownership goals.