Bad credit may get in the way of getting a second mortgage but it is still possible to get approval even with a less-than-desirable credit score. This is definitely worth a consideration because a second mortgage can be used to improve one’s credit score. A strong application is a must and you must shop for the best interest rate to reap the most benefits.
Dealing with Bad Credit
Getting a second mortgage with a bad credit comes with certain disadvantages. First of all, a second mortgage already comes with a higher interest rate than a first mortgage but with a bad credit, the lender will surely ask for a higher interest to cover the risk of lending to you. This is because a second mortgage is subordinate to the first mortgage and the lender for the second mortgage runs a higher risk of not getting paid if financial troubles arise. It is therefore only logical to be given higher interest rates for a second mortgage if you have bad credit but you can still get a good deal by shopping for the right lender.
Apply for a Second Mortgage with Bad Credit
The first step that you must do before applying for a second mortgage if you have bad credit is to find ways to improve your credit score. It is possible that there are some mistakes that can improve your score once corrected. By getting a copy of your credit history and reporting wrong entries, you may be able to get a great boost in your credit score for a relatively short span of time.
The second step that you must take to get a second mortgage despite having bad credit is to actively work towards reducing your debt, particularly the high-interest ones such as credit card debt. If it is possible, pay them off in full or make sure that the balance is below 30% of your credit card limit. Don’t fall for converting your credit card debt into new lower-interest card debts because this won’t help you in getting approval for a second mortgage. It will look like you have multiple credit applications which will make it seem that your finances are in worse shape than it really is.
Find the Best Lenders in Canada
Getting help from a mortgage professional will make your second mortgage application a lot smoother if you have bad credit. Mortgage professionals know which lenders are more lenient and which lenders will give you a better interest rate. Mortgage professionals can also share some tips for faster approval such as having a co-signer with a good credit score.
Getting a second mortgage with terms that you can manage within a short span of time will drastically improve your credit history and open the possibility of qualifying for other loans in the future. Contact us if you have bad credit and need help with applying for a second mortgage in Canada. We’ll be more than happy to discuss possible solutions with you at Mortgage Central Canada!