Increase Your Chances of Private Mortgage Approval Even with Bad Credit

You may be thinking that getting a private mortgage for a new home is not within the realm of possibility if you’ve had financial troubles in the past. Having bad credit is often perceived as a huge deterrent when trying to get mortgage approval of any kind. However, with the right approach, getting a mortgage approved can be achieved, especially with the help of mortgage professionals.

The fact is, mortgage approval for people with bad credit is becoming increasingly common. This is partly because of the increasing competition of lenders who are in the mortgage market and partly because of other factors, such as the changing real estate climate in Canada.

So how does one get private mortgage approval with bad credit? The process for getting approved for a loan despite having bad credit begins with applying to the right lender. Note that each lender will process applications based on who they perceive to be a less risky borrower for them. This is why specific lenders each have their own criteria. Read more about the factors that can help your mortgage application below!

A Co-Signer with Good Credit

Having a reliable co-signer such as one with a good credit score can make your application more appealing to lenders because it means that someone will be willing to pay on your behalf should you be unable to do so. A good co-signer is usually a close friend or relative who won’t mind having this responsibility with you.

Property Appraisal

The value of your property is typically what the lender can expect to recover if you are unable to pay for your loan for whatever reason. It is also the basis for the amount that the lender will lend to you. For these reasons, a professional appraisal is often required when applying for any type of mortgage. Note that some lenders will also have a list of trusted appraisers and may ask for a new appraisal if you hired someone unknown to them.

Real Proof of Income

There is no way of getting around providing proof of income when applying for a mortgage because your proof of income is also proof of your ability to pay the lender. Lenders also look into your GDSR or Gross-Debt-Service-Ratio to make sure that a good portion of your income will be available for making payments. Generally speaking, lenders prefer a GDSR of less than 30% though some may be more lenient and allow as high as 45% GDSR.

Know that there is more than one way to secure a private mortgage or get a home loan. If you approach the right people, even having bad credit ratings won’t be a hindrance to getting mortgage approval. If you have questions, simply contact us to allow our mortgage professionals to assess your financial situation and map out a way for you to successfully get a mortgage or a loan. If you have bad credit, talk to us today and find out how you can get a private mortgage or other types of home loan through our network of lenders.

New Rules for Second Mortgages in Canada

The mortgage world is abuzz with new information regarding getting additional financing for those who have a HELOC. Some of the Big Six banks have adopted the policy as of recent update. This means that those who have a HELOC will now have to prove that they are capable of paying the theoretical monthly payment based on their HELOC limit and not just the minimum required based on what they actually use.

Impact of HELOC Changes

The largest provider of HELOCs in Canada, TD Canada Trust, have also adopted the new changes, joining some other major banks including RBC. Rob McLister of RateSpy.com says that with these changes, the banks will assume that you’ve used up all your credit despite having zero balance. This change will have a significant effect on those who may want to get additional financing if they already have a HELOC.

McLister adds that this new development means that someone with a HELOC limit of $200,000 will now have to prove that he or she can afford to pay a $1,202 HELOC payment on a monthly basis. This translates to a sizable number of Canada’s 3.1 million HELOC holders now deemed unqualified to get additional financing like some can still do today.

Industry Reacts to Changes

In view of the above, some may need to restructure their HELOCs and have to incur additional fees as well as possibly lose financial flexibility. Industry insiders like CanWise Financial President James Laird agree that banks treating available credit as used credit is a big change. More so that many of the mortgage changes in the past 10 years have made purchasing another home quite difficult for those who just have a primary residence. With these changes, some may even be forced to choose between purchasing a second property or having a credit facility they can use when needed.

Although the change will not have the same effect everyone, and really only disadvantage those who want to get additional financing, it is alarming that industry experts were not consulted before new rules were introduced.

Emotional Effect on People

Industry insiders think that the change will have a bigger emotional than financial impact on people. Tighter regulations and controls may discourage people to venture into improving their lives by borrowing and investing. Some think that a few minor policy changes would have had a better outcome than the new changes since real estate trends have a cyclical nature, with some industry insiders dubbing the most recent change as “an overkill piled on top of an overkill” saying that the mortgage industry is past worrying about market stability and is now just posturing to please politicians, pundits, and regulators.

Concern Over HELOCs

FCAC Commissioner Lucie Tadesco (FCAC stands for Financial Consumer Agency of Canada) raised concerns about the behaviour of those who have HELOCs, most of whom are just paying for their interest. The main risk is that they may run themselves deeper into debt and may not be able to get out of it.

Are you concerned about the new development shared above? Contact us so we can help you assess what financial options may be best for your circumstances and needs if you already have a HELOC or thinking of getting a second mortgage in Canada.

What You Have to Know About Credit Card Debt Consolidation in Canada

Canada has about 43 million active credit cards at present time according to TransUnion. This huge number of credit cards for Canada’s population of 35 million means that people who do have credit cards have multiple ones, which means that there is an increased probability of them having issues with paying their credit card debt on time.

Why Go Through Credit Card Debt Consolidation?

The above is supported by the fact that an average Canadian has a credit card balance of about $4,100. From this data, it can’t be denied that having credit card debt is a typical problem most Canadians have. Fortunately, credit card debt consolidation is a lot easier to pull off these days as compared to years before.

Credit card debt consolidation is a solution for managing multiple credit card debts to make them easier to pay and manage. It works by combining several credit card debts into one loan with a lower interest rate. By having only a single bill with a lower interest rate to pay, it will be much more doable to pay on time and get loans fully paid off faster.

Options for Credit Card Debt Consolidation

In planning for a debt-free future, you have to make sure that the credit card debt consolidation option you pick is the one that will work best with your financial situation. Read more below!

  • An Unsecured Personal Loan is quite common but can be very challenging to qualify for plus come with relatively high-interest rate compared to other credit card debt consolidation options.
  • A DMP or a Debt Consolidation Program is great for those who need consistent guidance throughout the time they’re trying to go debt-free but will probably not be a good option for those who are more independent or those who have time to go on scheduled meetings with a debt counsellor.
  • A Credit Card Balance Transfer just transfers debt into another credit card with a lower interest rate to allow you to save on interest as early as possible. However, this comes with a fee which may or may not be worth it depending on the money you’ll save on interest. You can save more if you’re able to work with lenders that offer very low transfer rates if you know who to approach and when. 
  • A Home Equity Line of Credit or a Home Equity Loan for debt consolidation is easier to qualify for because these types of loans are secured by the equity of your home. Some lenders will even lend to homeowners who are self-employed or those who have a poor credit rating. Home Equity Loans and HELOCs also allow you to access larger sums of cash if you have a large enough home equity.

Benefits of Credit Card Debt Consolidation

Consolidating credit card debt not only saves you money in the long run but can substantially improve your finances right away. With time, it can also improve and repair bad credit score. If you’re looking for help with credit card debt consolidation, contact us so we can save you time and money by guiding you with making the right choice at Mortgage Central Canada!