Did you know that, according to the Financial Post, Canadians ended up in the hole with more than $100 billion in credit card debt over the last few years? Many Canadians struggle with having credit card debt and bad credit scores.
If you’re a Canadian homeowner with a bad credit score, then you might be worried about getting access to your equity or getting approved for a mortgage.
Fortunately, you can get a bad credit mortgage in Canada. Whether you want to refinance your mortgage, consolidate your debt, find the right private mortgage options, or get a home equity loan with bad credit, you have options.
We’ll cover the different ways you can access your home’s equity even if you have bad credit, and how to buy a home with bad credit. Read on to learn more.
Multiple credit issues in your credit history can lead to a bad credit score. If your score is low enough, big banks will consider you too high risk for a mortgage or other loan.
In general, a bad credit score is one that falls between 300 and 600 or sometimes 660. Using your credit cards and not paying them off can make it hard to maintain good credit that you need for a traditional mortgage.
Fortunately, you can get bad credit mortgage loans to refinance your home. Then, you may be able to get rid of your debt with high interest and monthly payments.
While getting a bad credit mortgage can be a good idea, you have multiple options to consider. That way, you can use the loan to help achieve your financial goals.
If you’re looking at a bad credit mortgage broker to refinance your home, you may be able to save money. You can go through a B lender, private lender where qualifying for a mortgage with bad credit is easier.
Before you get a bad credit mortgage in Canada, consider what you can do to increase your chances of approval. While you may not get the best interest rates for now, you can still get the money you need to refinance your house.
You can then use your new mortgage to save money on monthly payments.
If you want to refinance your home, then you need to use the right strategies for mortgage refinancing with bad credit. These include ensuring that you have an attractive application, having equity in your property, knowing what to expect, and more.
If you already have bad credit issues, lenders are already going to be looking at your application with a little bit of trepidation. For this reason, your application needs to be as good as it can be. This way, you’ll be taken more seriously by lenders.
To have an attractive application, you need to provide all the necessary documents. These include tax documents from prior years, pay stubs, and other supporting information.
Here’s an example of what could be considered supporting information.
If you’ve been at your job a long time, then demonstrating this to a bad credit mortgage broker will show them that you’re a reliable worker with a steady income.
To get this in document form, speak with the HR department at your job about providing documentation about how long you’ve worked there. This way, you can include it in your application.
When it comes to refinancing with a public or private lender, it helps to have the right amount of equity in your property. When mortgage refinancing, you should research to find out what home equity amount different banks expect you to have.
The maximum anyone can have to refinance their home, whether they have good credit or bad credit, is up to 80% loan to value. This means they must have at least 20% equity in their home.
Additionally, if someone has bad credit the big banks won’t entertain their mortgage application.
If you have poor credit, you might not get the lowest mortgage rates for the time being, however it’s a good idea to refinance your mortgage to pay off bad credit debt and collections. In this case, it might help to look into getting approval from a B lender or trust company or private lender. You might want to look for private mortgage lenders for bad credit who specialize in this type of loan.
It can help to get a more recent credit report so that you know if you’re the right fit for these types of lenders.
If you don’t have good credit, you need to know your break-even point before refinancing your home. Generally speaking, refinancing is only a good idea if you’re saving at least half a percent on the interest rate you currently have. In most cases, when you have bad credit and you’re refinancing to pay off collections, consumer proposals or other loans, you will save money in interest when refinancing debt into a mortgage.
Once you know what your break-even point is, you can start looking for lenders who will provide you with the type of mortgage refinancing you’re looking for.
If you have many debts, then chances are that you’re thinking of getting a debt consolidation mortgage. This way, you can combine all the debts you currently have into a big loan so you can pay it off every month. This might include the debts you have with credit cards.
When people do this, they often apply for low interest rates. This way, you’ll be paying less than you would be if you were paying for everything separately.
When you get a debt consolidation mortgage, these rates are lower than they would be with unsecured lines of credit.
If you’ve struggled with your credit history in the past, this can really be a great way for you to finally get out of debt.
To get a debt consolidation mortgage loan with bad credit, you’re using your home to pay off your debts. You can get a second mortgage, home equity loan, or refinance your home to consolidate and combine all debts into one loan (mortgage). As we discussed in the last section, you have options if you need to access your equity to pay off debt. The equity of your home is the security for this loan, basically. Having a secure loan or mortgage, will result in getting a lower interest rate than an unsecured debt such as credit cards and line of credits.
Even if you have bad credit, it’s possible. As a result, you can finally start to improve your financial situation.
Your debt, in the end, will be lower and easier to pay off. Finally, you’ll be able to get out from under that giant mountain of debt.
When it comes to getting a bad credit mortgage, Canada has many options. When using a bad credit mortgage broker there are several strategies you can use to buy a home with bad credit, including improving your credit score, find a high risk lender who specializes in bad credit mortgages, and more.
If you’re wondering how to get a mortgage with bad credit in Canada, you can get a lower mortgage rate (and be more likely to be approved) if you improve your credit score. Even though it may seem impossible, there are some ways to do this.
Some strategies for improving your credit score include:
Even after a few months of doing this, you will start to see your credit score improve. However, if you can’t wait to improve your credit score to get a mortgage, here are some other things you can do.
When it comes to getting a mortgage with bad credit, another option is to find a B lender, also known as a subprime lender. These lenders, who specialize in giving loans to people with a credit score that’s below 600, give out bad credit mortgage loans.
You may have heard the term "bad credit mortgage lender." These B lenders are this type of lender, too. They’re not necessarily private lenders, they are considered alternative lenders and trust companies.
If you’ve experienced a consumer proposal or bankruptcy recently, then you can get a mortgage through a B lender or private mortgage lender. There’s more flexibility for people with credit scores from 400 and up, too.
Whatever your credit rating, B lenders can finance your mortgage as they overlook bad credit with other credentials such as down payment, equity, and property.
Interest rates from B lenders are not too far off from the interest rates from banks. B lenders interest rates start from 2.54% and can be as high as 5%. However, it can be worth it if you’re looking for bad credit mortgage loans. They are generally a one year term, and we would work on refinancing with a bank in the future, once your credit improves.
In Canada, if you have good credit, you can purchase a home with as little as 5% down payment. However, if you have bad credit, traditional banks won’t approve your mortgage and you will need to have a minimum 20% down payment to qualify with B lenders or private lenders.
When you have a 20% down payment, B lenders will overlook your bad credit and will focus on your income and the property you’re buying, as you will have sufficient stake (equity) in the property. Private lenders on the hand don’t have income and credit qualifications as long as you have 20% or more down payment.
If you’re able to make it 20%, lenders will not look at your bad credit card score as negatively as they would otherwise.
There’s an added bonus that comes with making your downpayment bigger: you’ll be able to pay lower payments every month when paying off your mortgage.
Finally, you won’t have to pay for your mortgage default insurance. If you save money now, you’ll save money later and get a better mortgage loan.
Another way to get a mortgage if you have bad credit is to by getting it with a co-signer. Basically, this co-signer is someone who is the guarantor of the mortgage. If you aren’t able to pay off the mortgage, they’ll be equally responsible. This adds strength to your application as the lender will see someone with good credit is leveraging their qualifications for you.
Basically, the co-signer is the co-borrower of your mortgage. If they have a credit score or income that’s higher than yours, this will have a positive impact on the chance of you getting a loan.
Because they’re putting a lot of trust in you, your co-signer is usually someone close to you. For example, your parents or grandparents. You should choose someone you trust to be your co-signer.
Finally, we’ll cover how you can get home equity loans with bad credit. Even if you think this isn’t possible, it actually is. This is because many lenders are open to providing you with a home equity loan based only on your home’s value. Getting a home equity loan with bad credit is easy because your credit is not a factor for approval, neither is your income.
Our bad credit mortgage brokers specialize in getting a second mortgage, private mortgage, or home equity loan to pay off your debt and improve your credit score. The benefit of these types of loans that you don’t need to break your current mortgage and pay high penalties. Use your home equity to pay off debt causing bad credit.
Our mortgage brokers have expert knowledge with bad credit mortgages. With the help of your bad credit mortgage brokers you have access to many mortgage options regardless of your credit. A bad credit mortgage broker has arrange your mortgage with alternative lenders who overlook your bad credit, and focus on your equity.
With the help of our bad credit mortgage brokers, you can still secure a low interest rate bad credit mortgage approval.
Now that you’ve learned about how you can get a bad credit mortgage, consolidate your debts with bad credit, and refinance your mortgage despite your credit situation, you can see that there’s hope for you.
However, you might need more tips on getting a bad credit mortgage or one of these other situations.
If you need more tips, we’re here to help. At Mortgage Commitment, we’re experts when it comes to bad credit mortgages and more. We also offer Canadian mortgages.
To learn more about how we can help you, talk to a bad credit mortgage broker, and contact us now.
Competitive interest rates from alternative lenders for bad credit borrowers.
Fast quote & mortgage approval for bad credit homeowners.
Approved regardless of past collections, bankruptcy or consumer proposal
Equity mortgage approvals for bad credit borrowers.
Equity based mortgage approvals for fast access to home equity.
We take pride in taking the time and effort to match up every individual homeowner and homebuyer with the best mortgage financing options and rates. With access to more than 200 participating mortgage lenders, there are mortgage solutions for all types of borrowers. We listen and understand your mortgage and real estate goals, and find the best mortgage terms tailored to your specific goals to save you thousands of dollars on your new mortgage.