Like many mid-size cities throughout Ontario, Windsor is a great place to live. With easy access to the US border, a host of outdoor amenities, and an array of attractions, including a waterfront park stretching along the Detroit River, Windsor has much to offer its residents. For individuals with bad credit, investing in Windsor real estate can be tricky. But there are options with private lenders.
Lending Options for Windsor Homeowners and Borrowers
With astonishing numbers like this, many may be interested in either taking out the first mortgage to buy into the robust housing market or taking out equity from their homes as a second mortgage. Regardless of the reasons behind seeking mortgage financing, different lending options exist for the Windsor borrower/homeowner.
Mortgage professionals tend to classify types of lenders into three broad categories:
- A Lenders—These lenders are banks that require borrowers to pass stringent mortgage stress tests and expect exemplary credit scores and traditional yearly full-time income to approve mortgage financing.
- B Lenders—These lenders are made up of credit unions and trust companies. Although they may be less rigorous in their mortgage criteria expectations, they still expect strong credit and easily demonstrated income yearly.
- C Lenders—If you are looking for bad credit mortgages in Windsor, private lenders are the lenders who may lend out private secured mortgage loans individually, as part of a group of private lenders, and include mortgage brokers who specialize in lending private mortgage financing.
Lending options for Windsor borrowers depend largely on creditworthiness and the types and amounts of household income.
There are different reasons to take out secured mortgage options:
- Home Equity Line of Credit (HELOC)– This represents a revolving line of credit and can be used as needed. The equity that exists in your home will be used in a HELOC.
- Home Equity Loan- Just as in a HELOC, a home equity loan will utilize the existing equity in your home. With a home equity loan, you make monthly payments rather than accessing funds as needed and paying interest.
- Home renovation loans– By utilizing existing equity in your home, a home renovation loan can be negotiated using your home as leverage for the loan. Use these funds for renovations that boost your home’s market value and enhance your enjoyment while living there.
- Bridge financing -If you are requiring short-term financing for different reasons private bridge financing can help bridge the gap. Similar to most private loans, it is negotiated on a short-term basis. Most private loans are of term lengths between 1 to 3 years.
- Negotiating new terms on your principal loan– Renegotiating some of the terms of your current primary mortgage can ease the financial strain and help to ensure mortgage payments do not fall into arrears.
- Second Mortgage—Using existing equity in your home and assessing the Loan-to-Value (LTV), a private lender can negotiate an additional mortgage on your home, freeing up funds to pay for immediate expenses or to maybe invest in a second property in the robust Windsor housing market.
- Debt consolidation loans– If managing multiple debt payments is straining the household budget, private debt consolidation loans can help roll these payments into one monthly debt payment. Debt consolidation loans can boost your credit score if you make full, on-time payments each month.
What Criteria Are Private Lenders Looking for?
Once you decide to meet with a private lender, they will assess your Loan-to-Value (LTV), recent appraisal, and home equity. Generally, a private lender will prefer to see at least 25% equity built in your home.
As a rule of thumb, a private lender will not lend over 75% LTV (which represents 75% of the appraised value of your home). If your home is worth $400,000, then a private lender will not lend more than 300,000, which is 75% of the total value of your home. Credit and salary matter but won’t block private mortgage financing, unlike banks and credit unions that rely on credit scores.
The Interest rates charged by private lenders tend to be higher than the banks routinely change. Banks can afford to do this because mortgage loan approval depends heavily on near-perfect credit and easily demonstrated/substantial household income. Private loans are available to provide short-term mortgage financing if your credit is poor. Interest rates will be between 8% and 12%, with any associated fees ranging between 3% to 6% of the final cost of the loan.
What Can You Do to Prepare for Bad Credit Mortgages in Windsor?
- Research private lending options in your area
- Arrange to sit down with a private lender
- Know what type of loan you feel would address your short-term financial needs
- Gather all relevant paperwork
- Bring a recent appraisal and proof of the degree of equity in your home
- Consider a pre-approval if you are applying for a principal mortgage
- Be very familiar with your credit score and credit report
Generally, you should also do what you can to improve your credit score. Try to pay down high-interest debt if you can. Always pay any liability on time and in full if possible. The better your credit will ultimately be, the more favourable the terms on your final secured mortgage agreement.
Mortgage Broker Store Can Direct You Towards Suitable Private Mortgage Options
Windsor real estate has benefited from significant appreciation and a surge in housing sales across the province last year. The Windsor housing sector has only seen gains. According to the Windsor-Essex County Association of Realtors, August 2024 saw 463 homes sold which represents a 30.22% increase from the same time last year.
New Windsor listings are also up over 3% from the same month last year. In Windsor, the average home price now stands at $587,553, which represents a gain of 4.56% from last year’s average house price.
At Mortgage Broker Store, we have access to a network of established Windsor-based private lenders. We can determine the type of mortgage financing that will suit your financial objectives and guide you to a private lender who will help negotiate terms for a secure mortgage loan.
Poor credit does not have to prevent you from securing mortgage loans. Whether you’re buying a home or using your equity, private lending options can help you achieve your mortgage goals.