Most Canadian banks have to follow strict rules for mortgage approval due to tight government regulation. Bank regulations disqualify many Canadians from obtaining bank mortgages, leaving them to seek alternative financing solutions. Banks require mortgage applicants to have a high credit score, a high income, and a large amount of home equity. The private mortgage industry developed in Canada in order to cater to the needs of people who were turned down by banks. Private mortgage lenders are not subject to the same restrictions as banks and they are able to finance to people with bad credit. Mortgage Broker Store has a network of private lenders that offer bad credit mortgages in Mississauga and Barrie.
Credit Score Requirements
Banks require a credit score of at least 600 to approve a mortgage in Barrie and Mississauga. Generally, people with poor credit have a history of not making payments, which is concerning to banks. With a poor credit score, a homeowner can still get financing from a private lender. Instead of relying on credit score, private lenders mainly focus on the mortgages registered on a home and the value of the home to decide whether to approve a mortgage.
Private Lenders for Bad Credit Financing
If you’ve confirmed that your credit score is lower than 600 you will require the services of a private lender in order to get a mortgage. Factors such as unemployment, bankruptcy, and income will cause you to get turned down for a bank mortgage. Private mortgage lenders make their business by serving people who have been turned down by banks. These private lenders are usually the best option for people who have been turned away by banks. Typically their rates and fees are higher than the banks, but are far cheaper than credit cards and personal loans.
Home Equity Requirements
Home equity can be defined as the difference between a home’s market price and the value of all mortgages registered on the property. For many private lenders, knowing the home equity is usually enough to approve or decline a mortgage application.
In order to analyze the amount of home equity, a private lender must first calculate the Loan to Value (LTV) ratio of a property. The Loan to Value ratio of a property is obtained by dividing the value of mortgages on a property by its value. The ideal result should be 80 per cent LTV or less to get a new mortgage from private lenders. While LTV is the most important factor for private lenders of home equity loans, some also base their decision on credit score, employment history and other factors that could help in assessing risk. With a high amount of home equity, we can approve a homeowner for a new mortgage in as little as 24 hours.
Second Mortgages in Mississauga and Barrie
A second mortgage is an additional mortgage on a property with an initial mortgage. If there is sufficient equity left in the home, you can get a private lender to provide a second mortgage. There are several uses for second mortgage money including debt consolidation, business investing and education. Some people use a second mortgage to pay home renovations, luxury cars or even vacations. Second mortgages in Mississauga and Barrie can be used in any way the homeowner wants as private lenders have few restrictions on how the money is spent.
Fees for Bad Credit Mortgages
While private lenders are far more flexible than banks, they also charge higher rates and fees. Since private lenders are willing to take on riskier mortgages that banks turn down, they need to charge more to compensate for the risk. Typically, a private bad credit mortgage in Mississauga and Barrie will offer an interest rate of around seven to 15 per cent. Private lenders also charge additional fees to pay the administrative, legal and home appraisal costs. The greatest advantage of a private loan is that it can be fully customized to meet a person’s unique needs. A mortgage professional on our team can speak with you over the phone to outline how to write the mortgage agreement in order to best meet your requirements.
Ron Alphonso of Mortgage Broker Store
Mortgage Broker Store is a mortgage brokerage led by Ron Alphonso, the principal broker. He has over 10 years of experience and specializes in helping people in difficult financial situations. Ron maintains a network of private lenders that offer mortgages in cities and towns across Ontario including Aurora, Bowmanville, Collingwood, Caledon, Georgetown, Orangeville, Innisfill, Georgina, Uxbridge, Oshawa, Peterborough, Lindsay, Owen Sound, Markham, Thornhill, Richmond Hill, Newmarket, Niagara Falls, Port Hope, Cobourg and Oakville. Ron is often sought by the media to offer his opinion on various real estate and financial matters in Ontario. He has been featured on Global News and Toronto Life among other agencies seeking authoritative information on Canada’s real estate industry.
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