Every bank and institutional lenders have strict credit score requirements in order to qualify for a mortgage. For most banks people are required to have a credit score of 550 or better in order to qualify for a bank mortgage. People with a poor credit score will not be able to go to a bank and will have to get a bad credit mortgage. We help people with poor credit find private lenders which provide bad credit mortgages in Toronto.
Credit Score Numbers Required By Different Lenders
Banks are able to pull your credit score from the major Canadian credit bureaus, Equifax and TransUnion. Our mortgage brokers can pull your credit score and give you a copy, or you can request from these credit bureaus by visiting their websites. If you have a history of not paying bills, have been in bankruptcy or generally take on too much debt your credit score is more likely to be poor.
If you’ve received a copy of your credit score and your score is less than 550, you will need to find a private lender for a bad credit mortgage. Toronto’s bad credit lenders can offer mortgages no matter what the client’s credit score is. It is important to know that bankruptcy and consumer proposals will also make you illegible for bank mortgages. We have a network of private lenders that provide bad credit mortgages for people in Toronto and across Ontario.
Instead of looking at credit, private lenders will look at the existing debts on a property when making a decision to provide a mortgage. To reduce the risk inherent in bad credit mortgages private lenders will not lend on properties with too much debt. When a lender creates a mortgage agreement, they have the ability to sell the house when the borrower refuses to pay the mortgage payments. When a lender sells a property, they first pay off previous mortgage holder then they may reclaim their own money. To judge the risk of a property the lender will calculate the Loan to Value (LTV) of the property. To calculate LTV you divide the value of existing secured debts by the estimated selling price of the property. Bad credit mortgage lenders in Toronto will lend on properties that have up to 85% LTV. Lenders can offer better interest rates if the mortgage applicant has a high income or a better credit score, but these are not required to get approved for a mortgage.
As with most risky investments, bad credit mortgages carry a higher interest than bank mortgages do. Normally a bank mortgage would come with an interest rate of 3% to 4% while a bad credit lender might charge rates from 7% to 15%. Private lenders will also charge fees for setting up the mortgage. Administrative fees must be paid to the lender and their lawyers and a fee must be paid for a property appraisal. In order to get the best deal you should contact multiple lenders that offer bad credit mortgages. We know many lenders that service Toronto and we send clients multiple quotes from different lenders.
Paying off your credit cards and bills will cause your credit score to increase. In order to increase your credit score quickly you should be able to pay off your monthly debts on time. Credit cards are good tools for improving credit scores when you pay off all monthly charges. If you only put small charges on the credit card it will be easy to pay off. Another method would be to request a secured credit card from your bank.
All top Canadian banks offer secured credit cards. To get one you must first pay a deposit which is used when the credit card fees are left unpaid. It is recommended to not exceed the card’s limit by more than 60% and to fully pay off all charges. Repairing a credit score generally takes around 6 months.