Credit unions and banks strictly require that a borrower shows a credit score above 550 to qualify for a mortgage. Any number below that point is regarded as too risky, rendering it impossible for people to approach credit unions for loans. We help such people apply for bad credit mortgages in Woodstock.
Different Lenders Demand Different Scores
- Credit unions need to see a score of 550 points
- Banks need even more at 600+ points
- A private lenders’ decision is not based on credit score
How to Verify Your Score
Credit scores for Canadians are calculated by leading credit bureaus Equifax and TransUnion. Individuals who need to see their personal reports can request them from the bureaus’ sites but at a fee. Banks and credit unions can pull their clients’ reports directly so that it can guide them during decision making. If you are in too much debt, odds are you have a low score and so is anyone who has been in bankruptcy or consumer proposals in the past two years.
Private Lenders Offering Bad Credit Mortgages in Woodstock
If your credit score falls below 550, you can only work with private lenders offering bad credit mortgages. Woodstock’s bad credit lenders do not mind a borrower’s credit score, bankruptcy or consumer proposals. We have a large pool of private lenders offering their services to several people in different cities of Ontario province. You have to explain why you need the money but worry not because lenders here are very lenient and will accept most reason given for needing a bad credit mortgage loan.
Requirements for Bad Credit Lender Mortgages
Private lenders are only concerned about the current selling price and value of debts on a property. They understand that their choice clients are a high risk to invest in and therefore avoid giving out loans to properties already riddled with extra debt. The mortgage agreement signed by private lenders allows them to sell the property and recover their money if a borrower defaults. However, the rules dictate that when a lender sells property they first have to pay previous mortgage holders before making their claim.
For proper risk assessment, the loan to value ratio must be calculated. This is done by dividing the value of debt by the current estimated selling of property in that city or neighborhood. Bad credit mortgage lenders in Woodstock will work with maximum LTV of 75% and can offer better interest rates to those with a steady income and not-too-bad credit score. A home whose current selling price is $1,000,000 but has debts of $700,000 has 70% LTV which reflects enough equity needed for a bad credit mortgage.
Interest Rates and Fees Involved
As with most high-risk investments bad credit mortgages carry high-interest rates. For people with good credit, banks issue loans at only 3% to 4% while private lenders can only give out mortgages at 7% to 15% interest. They also charge fees required to set up the mortgage like appraisal, legal and administrative fees. In order to get a private lender offering fair interest rates, you must look around the market. We have many lenders in Woodstock and to save you the trouble we will gladly send you multiple quotes from them.
How to Repair a Poor Score
Your score will definitely improve if yo consistently pay off your debts and avoid using your credit card for all purchases. Being the most common form of credit, users can use these cards to improve their dwindling scores. Charging only small, necessary purchases means that when the deadline comes users will be able to clear the debt together with the interest. Besides ordinary cards, banks issue secured credit cards which as the name suggests are secured with a deposit. This amount acts as a limit and shouldn’t be exceeded by more than 60%. This is to ensure that when time comes there is enough money on the card to pay off your debt as well as interest. Leading banks in te country offer secured credit cards but users must still make a point of paying off all charges in time for their score to improve. Results of your efforts to repair the credit score will start being felt after six months, the time it takes credit bureaus to update credit reports. With patience and commitment, you will certainly boost your credit score and hope to get better loans at affordable interest rates.