There are many challenges Canadians face when looking for bad credit mortgage options in Canada. Everyone has a different financial fingerprint and monthly expenses vary for everyone. Suffering from bad credit does not necessarily mean that you will never become a homeowner or that there are no alternatives outside of a bank to refinance your mortgage.
Having a bruised credit profile simply limits the number of mortgage lenders that will approve mortgage financing. The mortgage lenders that help while your suffering from poor credit have much the same criteria as a bank or credit union, however; can find ways to work with you a lot easier.
Mortgage lenders for bad credit borrowers
There are several bad credit mortgage options in Canada that we can assist you with. Mortgage brokers have access to financing options that ‘A+’ mortgage lenders just don’t. A mortgage loan is not only for people with good credit scores.
- B Lenders (Sub-Prime Alternative Lenders)
- Schedule A lenders that are outside of the big 5 banks
- Smaller and local credit unions
- Private mortgage lenders
Seeking a mortgage with bad credit comes with slightly higher interest rates but can be done. Alternative lending is just that an alternative to your bank or credit union to get the financing you need to be approved. Your credit rating has little to do with the application.
Bad credit mortgage score requirements
Ideally, a credit score needs to be 550 and above to suit the likes of options A, B, and C (listed above). When your credit is bruised you are now considered high risk. A bad credit mortgage lender is more intrigued about why your score dropped and the chain of events that led up to your lower score.
As for private mortgage lenders, there is no minimum credit score requirement. Lenders are more interested in the property they are lending on and the amount of home equity available. With that, in mind expect to see a high rate mortgage than your traditional mortgage lender.
Purchase bad credit mortgage options in Canada
In order to qualify to purchase a home with bad credit the down payment amount required is a minimum of 20%-25% of the suggested purchase price.
For example, a purchase price of $100,000 with a down payment of 20% would mean $20,000. So, for every $100,000 one would need to come up with $20,000.00 to ensure the minimum of 20% of the purchase is maintained.
Due to bruised credit files being higher risk the area in which a property is being purchased will hold weight when mortgage lenders review a file. If a home is located in a major urban city center, then the more a lender will provide mortgage financing. Should a home be quite rural and be operating outside of town services then a lender will consider providing less of a mortgage. Marketability is a key factor due to the overall risk of a bad credit file.
Borrowing against my existing home:
The same rule of thumb applies here as it does with purchasing a home. Borrowers are limited to borrowing up to 80% of the home’s value maximum. On a case-by-case basis, private mortgage lenders will consider lending up to 85% of a home’s value.
For example, if the home value is $100,000, at 80% that would be a total of $80,000.00.
The area of the property will dictate how much a lender can consider lending. The more rural the property is the less likely a lender will consider a higher loan to value.
Bankruptcy or consumer proposal bad credit mortgage options in Canada.Â
Your credit has more than likely taken a hit if you filed a bankruptcy or consumer proposal. Â It is important to note that if they have not been paid off most lenders will want them paid off at the time of providing a new mortgage. If you are purchasing a home, then you will be responsible for paying it off prior to closing. On the opposite side of things if you are an existing homeowner it will need to be included during the mortgage refinance process.
If you overthinking your options it may be because your credit score is all you thinking of. Remember bad credit mortgage products are available in Canada. They can be set up with flexible mortgage payments and terms to fit in with your budget. Lendtoday.ca is a great resource for private lenders and B lender solutions.
If you’re looking to get approved contact us at 1-855-242-7732 or apply online today.
- Can You Pay Mortgage with Credit Card? - November 8, 2023
- Understanding the Foreclosure Process Ontario and How to Save Your Home - November 1, 2023
- How Much Money Can You Get from a Reverse Mortgage? - October 27, 2023
