Trying to buy or refinance your own home but can’t get a mortgage because of your bad credit rating? There is a market and product available for you, sometimes referred to as “B” lending and in certain cases, private lending
Traditional mortgage providers rarely offer their mortgage products to people with bad credit. Why? Because if you’ve had trouble paying your bills, credit cards or loans in the past, you’re a bad risk.
The recent increase in the number of people in this situation, however, has meant that demand has risen for suitable mortgage products. The larger lenders are still wary of bad credit risks, so it has fallen to more specialist lenders to fill the gap in the market. Consequently, the bad credit mortgage market is growing, and is competitive, which means that customers suffering from poor credit can find a range of mortgage products that suit their needs and that help them get their finances back on track.
So, what is a bad credit mortgage?
A bad credit mortgage is a financial product that’s specifically designed to let you buy your own home even if you have a bad credit rating.
- Interest rates on these mortgages are typically marginally higher than for traditional mortgages. This is because the risk to the lender is higher.
- There may be some additional conditions on your mortgage, which are placed there to give security to the lender. These might include a larger arrangement fee at the start of the mortgage, or stricter redemption penalties.
- A bad credit mortgage can help you to address your financial difficulties and even to improve your credit rating over the long term.
With bad credit, there is some leniency with respect to income and other qualifying factors as well.
However, with bad credit mortgages, lenders are also more strict on down payment or equity, where you should have at least 15 percent available. They are also stricter on property types and locations.
Do we know this market? Having assisted thousands of clients in Ontario over the last 28 years, we sure do. We provide an analysis of the costs associated with arranging a bad credit mortgage. We weigh the costs against opportunity and against forecasted length of time before the client can execute their exit plan to move back into “A” lending. We even provide a plan and guidance to improve credit so the exit plan can be executed as quickly as possible. In fact, most of our clients are out of B lending in 12 to 24 months.
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