A bad credit mortgage is a mortgage designed for someone with poor credit. Having bad or poor credit is a roadblock to securing a mortgage from banks or other primary lenders who have strict credit requirements.
In the finance sector, your credit rating depends on your history of paying back money given to you from recognized lenders like banks and credit card companies. Anytime you borrow from a lender, it gets recorded in a database along with your repayment patterns.
Credit bureaus use this information to calculate a credit score between 300 to 900. The higher your score, the more likely you will be approved for a mortgage, and at a lower interest rate.
Primary lenders have strict credit score requirements. A score of at least 680 is needed to be considered for a mortgage from primary lenders. However, even with a good score, you can still be denied.
If you are denied a bank or other primary lender mortgage, you need to find an alternative lender. Alternative lenders are also called bad credit mortgage lenders.
Bad credit mortgages have fewer restrictions for eligibility but charge more fees and interest due to the extra risk.
How to get approved for a bad credit mortgage in Newmarket
There are two types of alternative lenders, each with their own set of requirements to approve a mortgage. Here is a summary description:
- Trust companies, credit unions, HomeEquity Bank, B2B Bank
- Require a 20 per cent down payment
- A minimal credit score of 550
2. Private Lenders
- Mortgage investment corporations, syndicated mortgage lenders and private individuals
- Require property market value appraisal
- Can lend up to 80 per cent of the property value
- No credit score needed
Why private lenders invest in Newmarket
Newmarket is a rapidly expanding community. Newmarket has a population of 84,000 and is expected to surpass 100,000 by 2025.
Across the city, there are over 20 different residential housing projects currently under construction.
Infrastructure development in the form of upgraded public transportation, including the Viva rapidway along Davis Drive, demonstrates that Newmarket is taking steps to ensure they can meet the growing demand for residential housing in the future.
Increasing growth in population, economic activity, and accessibility to other cities translate into lots of potential homeowners who need mortgages.
Private lenders have taken notice. Compared to Toronto, cities like Newmarket, Richmond Hill and Barrie offer home buyers a wide variety of less expensive housing options. With their growth potential, these communities are ideal for real estate investment.
Bad credit mortgage rates and fees
Alternative lenders are more expensive than banks and other primary lenders due to the risk they take on. Here are their typical rates and fees.
- Interest rate of 4 to 6 per cent
- Broker fee of 1 per cent
2. Private Lenders
- Interest rate of 7 to 12 per cent
- Broker fee of 3 to 6 per cent
It is important to note that the rates and fees charged by individual private lenders will vary widely. Learn more about private lenders here.
Finding bad credit mortgage brokers in Newmarket
Finding the right bad credit mortgage lender is challenging. Trying to understand and compare different lenders is a daunting task, but The Mortgage Broker Store can help.