What is a bad credit mortgage?
A bad credit mortgage is an option for borrowers with below-average credit.
These loans make credit available to credit-challenged applicants who might otherwise struggle to find loans with traditional lenders.
Even though your interest rate won’t be the lowest, making your payments on time each month will help you rebuild your credit. You might be able to refinance in the future at a lower interest rate.
Who is a bad credit mortgage for?
This includes, but is not limited to borrowers with:
- no credit history
- poor credit
- bad credit
- horrible credit
or who have made mistakes and/or suffered from financial challenges in the past.
Some factors that may hurt your credit score:
- missed mortgage loans payments (arears)
- property tax arrears
- bankruptcies (past & present)
- a consumer proposal (past & present)
- an unpaid payday loan
- debt problems
- tax debt (Revenue Canada, Revenu Québec, etc.)
- installment loans in arrears
- unsecured loans in arrears
- credit cards in arrears
- missed mortgage loans payments (arears)
- property tax arrears
- bankruptcies (past & present)
- a consumer proposal (past & present)
- an unpaid payday loan
- debt problems
- tax debt (Revenue Canada, Revenu Québec, etc.)
- installment loans in arrears
- unsecured loans in arrears
- credit cards in arrears
How does a bad credit mortgage work?
The majority of private mortgage lenders do not require borrowers to have a minimum credit score, making these loans ideal for borrowers who have credit issues.
Poor credit mortgages are only intended to be a short-term solution while you work to improve your credit.
Mortgages with bad credit will have higher interest rates, and usually come with additional fees.
When you’re ready to submit an application for a bad credit mortgage, we’ll require some information from you, including but not limited to your:
- Credit Scores and Credit Report
- Income And Employment History
- Down Payment
- Debt-To-Income History
- The Value of The Property
What are the advantages?
Fast and simple approvals
If you have bad credit, you will be unable to obtain a mortgage from a traditional lender. At Budget Rates, we will help you get approved by an alternative (or ‘B’) lender. Some lenders have a quicker approval process and need less paperwork than a bank.
If your credit isn’t good enough for a B lender, we’ll look into partnering with a private lender.
Several Canadian private lenders can approve and fund bad credit mortgages in as little 48 hours.
No minimum credit check needed
Some lenders (mostly private) do not even require a credit check.
Bad credit mortgages can help you rebuild and improve your credit
If you get a bad credit mortgage from a non-traditional lender and make your payments on time each month, you can steadily increase your credit score over time.
In a few years, when your credit score improves, you may be able to qualify for a new mortgage with a conventional lender at a lower interest rate.
Bad credit mortgages can be used for a variety of transactions, including:
- purchasing homes or properties
- refinancing a home or property
- renovations
- debt consolidation
Allows you to carry out your plans
Whatever your plans may be, acting on them now may be advantageous for you as opposed to waiting for your credit score to improve, which may take years.
May assist in improving your credit score
Showing your ability to manage your finances is critical when seeking new financing, whether it is a mortgage or anything else.
Could save you money in the long run
We don’t know what the future holds. The best thing to do might be to act now instead of waiting.
What are the disadvantages?
Higher than traditional interest rates
Alternative lenders and private mortgage lenders charge higher interest rates than traditional lenders like banks because they take on greater risk. In order to make it worthwhile for them to assume the greater risk and to make up for the rise in bad debt that they must accept, they charge a higher interest rate.
Extra lender and broker fees
There will often be additional broker fees when an alternative lender is involved. The borrower does not pay this fee upfront; it is deducted from the mortgage loan. In addition to interest rates, private lenders may charge lender fees. Lender fees are usually deducted from the mortgage advance and paid by the borrower after closing.
Fewer options
Bad credit means fewer lenders will consider your application. Having fewer options is not always a bad thing, so long as the option(s) you do have still provide an acceptable solution to your needs. Over the past few years, the bad credit mortgage market has experienced remarkable progress, which has resulted in a significant increase in options.
Bigger down payment or equity
To mitigate risks, lenders will often only extend mortgage offers to borrowers with high equity or a significant down payment. Still, the amount you need will depend a lot on your actual credit history.
Collateral is occasionally required.
In order to secure the loan, it is possible that you will be needed to put up collateral, such as your house or car. You risk losing your house or car if you don’t make your payments.
Can lead to further debt.
Having a budget is important because it makes sure you can pay back what you borrow. Lenders who practice predatory lending are only too happy to take your money.
What do I need to get started?
Think about how a bad credit loan will affect your finances before deciding if it’s right for you.
If you have a low credit score, you’ll pay more in interest and have a higher monthly payment, and some lenders charge hidden fees. Also, depending on the length of your amortization, interest costs could be expensive.
Nonetheless, a bad credit loan might be the best option for you. We’ll research products with fair terms and low monthly payments. If all other avenues have been explored and you still need assistance, applying for a bad credit loan may be helpful in regaining control of your finances.
Our goal at Budget Rates is to provide you with unbiased, straightforward guidance so that you can get approved for the best mortgage terms and lowest mortgage rate that are available to you. We know that temporary life conditions might make mortgage applications difficult. Finding a mortgage that works for you is our first priority.
Do you have bad credit?
Is this possibly the ideal solution for you? Then contact us today!
