Bad Credit Mortgage in Canada: An In-depth Guide

bad credit mortgage

If your credit is less-than-perfect, it’s not the end of the world and there are many options still available to you.  A bad credit mortgage in Canada gives you options you don’t have with traditional loans.

If you’re looking to refinance or buy a home with a poor credit score, you’ve come to the right place. We’ve put together everything you need to know about refinancing or buying a home without perfect credit.

Credit Score 101

Your credit report is what tells lenders how you’ve handled credit in the past. This number is what mortgage lenders look for to determine your creditworthiness. In Canada, credit scores range between 300 and 900.

A score over 640 is considered good. A score between 580 and 639 is fair and a score under 579 is poor.

Checking Your Score for a Bad Credit Mortgage in Canada

To check your credit, the two credit bureaus in Canada are Equifax and Transunion. Transunion allows for one free download of your report a year. Many banks and credit card companies will also allow you to check your score at any time.

Make sure to download your whole report instead of just looking at the score. You’ll want to see what’s lowering it in order to work towards a better score. Checking your score ahead of applying for a mortgage or refinance will also give you an idea of your loan terms and the types of loans you’ll be applying for.

Benefits of a Bad Credit Mortgage or Refinance

While we all wish we had perfect credit, this isn’t always possible. The good news is that mortgages don’t have to be a one-size-fits-all solution. If you’re considering applying for a new mortgage or refinance with bad credit in Canada, we’ll go over several of the benefits below.

1. You’ll Improve Your Credit Score

A mortgage or refinance will boost your credit score. Home loans are considered good credit to lenders. They show responsibility and financial stability. Store credit cards are examples of bad credit, for instance.

Paying your mortgage on time will improve your credit score. The longer your good payment history is, the better your score will be.

2. Don’t Give Up on Your Dream of Home Ownership

If you’ve suffered from financial hardship in the past, it doesn’t mean you’ll never be a homeowner. You’re likely spending money on rent and not building any wealth. Increasing rent prices aren’t helping your financial situation either.

If you’re someone with a great job and good income, don’t let your credit score stand in your way. A bad credit mortgage is a great option compared to a conventional mortgage.

3. A Bad Credit Mortgage Refinance Allows You to Stay in Your Home

As an existing homeowner, your home is likely your biggest asset. Protect this asset with a bad credit mortgage refinance. Just because you don’t have perfect credit, doesn’t mean you need to sell your home.

Stay in your home and refinance. This will allow you to pull money out if you need to or even change the term of your loan. You’ll have far more options compared to a traditional mortgage.

4. You’ll Build Equity

Homes are a great investment. Over time, your home is appreciating in value. This means your home is building equity. If you sell your existing home or stay in an apartment, you’re missing out on equity.

The longer you own your home, the more you’re earning. This also includes the money you put down initially and all the payments you’ve made over time.

5. Lower Your Payments

A mortgage refinance will lower your monthly payments. This is a lifesaver when money is tight. You’ll see better loan terms and a more affordable monthly payment. Now you’ll benefit fit from the flexibility of improved cash flow.

How to Boost Your Score With a Refinance With Bad Credit in Canada

If you’re looking into refinancing your home without perfect credit, we’ve got you covered. We’ll go over some easy ways to boost your score with a refinance.

1. Pay Your Bills on Time

When you’re refinancing your home, you’ll want to pay all your bills on time. Paying your mortgage along with your other bills on time each month helps to boost your score.

Make payments automatic using the online feature from your bank. Set reminders or calendar invites to help you stay on top of due dates. This is one of the quickest ways to increase your score.

2. Create a Budget

To help boost your credit score, start with a budget. Your budget will greatly help your financial health. Write down your income as well as your expenses. This is quintessential to getting ahead financially.

Make a plan for your when you refinance that fits with any other expenses you have. From here you can cut any expenses you don’t need. You might find you’re paying for memberships or subscriptions you aren’t using.

You’ll also see where you have any extra money that can go towards credit card payments or other debt. Getting your score higher starts with a budget.

3. Give it Time

The longer your credit history the better position you have. Someone with no credit has a lower score because they haven’t shown how they use credit. Paying your mortgage for a long period of time will help boost your credit score.

The longer you own your home, the higher your score is. Paying your other bills on time also helps to increase your score. A long, history, of on-time payments, is what gives you the credit score you need.

4. Pay Down Your High-Interest Debts

Bad Credit Mortgage Refinance Canada

Your debt-to-income ratio is another factor in your ability to get a mortgage. This is a ratio of debt to income. Make a plan to chip away at your debt and you’ll see your score increase.

Big banks look at income and debts heavily but there are alternative lender options. Sub-prime lenders have competitive interest rates.

Your credit score doesn’t have to affect your ability to stay in your home. With a bad credit mortgage refinance, you’ll see new home loan terms and a lower payment. If you have steady income and equity in your home, a refinance with bad credit is a great option.

If your looking for help contact us at 1-855-242-7732 or apply online today.