Introduction
High risk mortgage lenders in Oshawa provide financing solutions to borrowers who may not meet the strict lending criteria of traditional banks. Securing a mortgage through conventional lenders can be challenging if you have bad credit, high debt, or a low down payment.
Private mortgage lenders and alternative financing options exist for borrowers in unique financial situations. While these loans often come with higher interest rates and shorter terms, they provide a path to homeownership or refinancing when banks say no.
This article explains how high risk mortgage lenders work, the key factors they consider, and what borrowers can do to improve their approval chances.
What Is a High Risk Mortgage?
A high risk mortgage is a home loan designed for borrowers who do not qualify for traditional bank financing. This could be due to low credit scores, unstable income, high debt levels, or a high loan-to-value (LTV) ratio.
Since high risk borrowers pose greater financial risk to lenders, these mortgages typically have:
✔️ Higher interest rates than conventional mortgages
✔️ Shorter loan terms (1-3 years)
✔️ Larger down payment requirements (10-20%)
Borrowers in Oshawa facing financial challenges can turn to private lenders, credit unions, or alternative mortgage providers who offer more flexible approval criteria.
Key Factors That Affect High Risk Mortgages
1. Credit Score & Borrowing History
Your credit score plays a major role in mortgage approval. Banks often require a minimum credit score of 680, but private lenders may approve borrowers with scores as low as 500-600—at a cost.
How credit score impacts mortgage terms:
✔️ Higher credit score (680+) → Lower interest rates, better terms
✔️ Lower credit score (below 600) → Higher interest rates, more lender fees
If you’ve missed payments, filed for bankruptcy, or defaulted on loans, expect stricter conditions.
2. Loan-to-Value (LTV) Ratio
LTV measures how much of a property’s value is being financed.
Formula:
🔹 LTV = Mortgage Amount ÷ Property Value × 100
Example: If your home is worth $500,000 and you owe $400,000 on your mortgage, your LTV is 80%.
Lenders prefer LTV ratios of 80% or lower—meaning you have at least 20% home equity. If your LTV is higher, lenders may charge:
✔️ Higher interest rates
✔️ Additional lender fees
✔️ Private mortgage insurance
3. Debt-to-Income (DTI) Ratio
DTI measures how much monthly income goes toward paying off debts. A high DTI signals financial risk, making mortgage approval difficult.
Lenders prefer a DTI below 40-45%. If your DTI is too high, reducing debt before applying for a mortgage can increase approval chances if you’re trying to qualify with a financial institution.
4. Interest Rates & Fees
High risk mortgages come with higher rates due to increased lender risk.
🔹 Traditional lenders: 5-7% interest
🔹 High risk lenders: 8-15% interest
In addition to higher interest rates, borrowers may face:
✔️ Lender fees (1-3%)
✔️ Broker fees (if using a mortgage broker)
✔️ Legal fees for closing the mortgage
Mortgage Options for High Risk Borrowers in Oshawa
1. Private Mortgage Lenders
Private lenders focus on home equity rather than credit scores. These lenders approve loans for borrowers who may have:
✔️ Low credit scores (below 600)
✔️ High LTV ratios
✔️ Unstable or self-employed income
Since private mortgages have shorter terms (1-3 years), borrowers often use them as a temporary solution before refinancing with a lower-rate lender.
Example:
🔹 Mark, a homeowner in Oshawa, had a 580 credit score and needed to refinance. His 10% home equity limited his options. A private lender approved a one-year mortgage, allowing him to rebuild credit and refinance later at a better rate.
2. Credit Unions & Alternative Lenders
Credit unions and B lenders offer more flexible criteria than banks, though they still require:
✔️ A credit score of 600+
✔️ Proof of stable income
✔️ 10-20% down payment or home equity
Rates are lower than private lenders, but the approval process takes longer.
3. Second Mortgages
A second mortgage allows homeowners to access equity for debt consolidation, renovations, or emergency expenses.
Example:
🔹 Samantha, a self-employed graphic designer, struggled to get a mortgage. Banks rejected her due to irregular income. A private lender approved her for a two-year mortgage, based on her bank deposits rather than tax returns.
How to Improve Your Eligibility for a High Risk Mortgage
1. Raise Your Credit Score
✔️ Make timely payments on bills
✔️ Lower credit card balances
✔️ Check your credit report for errors
Even a 30-50 point increase can improve mortgage terms.
2. Increase Your Down Payment
Saving a larger down payment (15-20%) helps lower LTV ratio and risk level.
🔹 A 20% down payment eliminates the need for mortgage insurance, reducing costs.
3. Reduce Debt Before Applying
Lowering credit card balances, car loans, and personal loans helps reduce DTI ratio, making you a stronger mortgage candidate.
4. Be Prepared with Required Documents
Having income proof, tax returns, and credit history reports ready can speed up approval.
Frequently Asked Questions
1. What defines a high risk mortgage lender in Oshawa?
A lender that provides mortgages to borrowers with bad credit, high LTV ratios, or high debt levels.
2. How does bad credit affect my mortgage options?
A low credit score leads to higher interest rates and stricter lending terms.
3. What’s the difference between a private and conventional mortgage?
🔹 Private lenders approve loans based on home equity rather than credit score.
🔹 Conventional lenders require higher credit scores and stable income.
4. What documents do I need to apply?
✔️ Income proof (pay stubs, tax returns)
✔️ Credit history report (normally retrieved by your mortgage broker)
✔️ Property tax bill
5. How can I improve my mortgage eligibility?
✔️ Raise your credit score
✔️ Save a larger down payment
✔️ Lower your debt
Conclusion
High risk mortgage lenders in Oshawa help borrowers who don’t qualify for traditional bank financing.
If you have bad credit, high debt, or a low down payment, private lenders, credit unions, and second mortgages offer alternative financing solutions.
To improve your mortgage approval chances:
✔️ Improve your credit
✔️ Save a larger down payment
✔️ Reduce debt and prepare key financial documents
For personalized mortgage options, speak with a mortgage professional to better understand your options.
Learn About High Risk Mortgage Lenders
