Bad Credit Mortgage
Do you have bruised or bad credit and are in need of a new mortgage, or looking to refinance your existing mortgage? We can help.
Many Canadians are facing multiple loans and increased debts. It’s easy to get behind on a payment or start to feel overwhelmed by bills. Unfortunately, each slip on your credit can have lasting effects – especially when you’re looking at a major purchase such as a house.
These days when you apply for a mortgage with your bank and don’t meet their criteria, what do you do next? Who can you turn to?
Auxilium Mortgage of course! We have access to lenders who specialize in non-conventional mortgage loans to help out people just like you. People who:
- Have less than perfect or bad credit
- Have no established credit
- Have had a previous bankruptcy
- Need a non-traditional mortgage
- Are currently in a consumer proposal
- Are in credit counselling today
- Are new to Canada and are non-landed immigrants
- Are self-employed and can’t verify their income by traditional means
- Are offshore investors, investing in Canadian real estate
- Are buying a unique property that doesn’t fit into the guidelines of the major banks and insurers, like CMHC.
If you fall into any of the above categories, we have the following options available:
1. First Mortgage Program
Borrow up to 80 percent of the value of your property in the form of a first mortgage, either with a bank or finance company. For example, let’s say your home is worth $500,000; under this program you could borrow up to 80% or $400,000 on a 1st mortgage.
This program is for clients with traditional employment, as well as those that are self-employed, both with verifiable & non-verifiable income. Credit wise, clients may have anything from a few late payments to a discharged bankruptcy on their credit bureau. This program generally offers shorter term solutions that are priced fairly competitively in the marketplace.
2. Second Mortgage Program
Up to 90 percent of the value of your property in the form of a second mortgage with a secondary lender, either institutional or private. Again, if your home is worth $500,000, you could potentially borrow up to $450,000 combined between an existing 1st mortgage and a new 2nd mortgage. Let’s suppose the 1st mortgage is $350,000; that means you could potentially have a 2nd mortgage for $100,000, which would take you to 90% combined between the two.
This is an excellent solution when it doesn’t make sense to pay out the existing first mortgage; for example, when it has a great rate or the penalty to do so is cost prohibitive. Credit can be reasonably tarnished, even up to a previous bankruptcy. Folks with unverifiable income, the self-employed and recent immigrants to Canada are just a few examples of those that fit this program.
3. Equity 1-2-3 to 65%
This is our simplest program: a first or second mortgage up to 65 percent of the value of your property. So once again, if your property is worth $500,000, you can borrow up to $325,000 either on a brand new 1st mortgage or any amount on a 2nd mortgage, so long as the combined value doesn’t exceed 65%.
This solution can be for folks who may have reasonable credit or exceptionally tarnished credit, and/or those who may have gone through a previous bankruptcy. Income is either unverifiable or not sufficient for a traditional lender.
Here’s how it works:
Step 1 – We take an application and if your file fits this program we approve you the same day (regardless of credit or income).
Step 2 – We get an appraisal to confirm overall lending value of your property.
Step 3 – You get up to 65% of the appraised value.
That’s it. No "stress test" or “jumping through hoops” under this program. Your home is the key, and no one “puts you through the wringer”.
Here is a brief video that explains some of the concepts that are explained below:
Non-conforming or bad credit mortgages are qualified based on the following:
When your deal doesn’t fit all the boxes for a traditional mortgage, then down payment and equity are everything. Should your mortgage loan go sideways, the down payment or equity is all that’s left to provide a cushion for the lender. That’s why our mortgage lenders will generally want to see a minimum of 10 percent of the value of the home, in the form of down payment or equity already in the property. Naturally, the higher the down payment, the easier the qualification, like our “Equity 1-2-3”.
Down payment of as little as 5% to 10% and exceptionally bruised credit will result in the lender considering other aspects of the deal, such as your job stability & income.
Traditional lenders rely heavily upon formulas that look at your declared, provable income to qualify you. The lenders we work with are flexible and will consider all forms of income: self-employment (fully declared or not), commission, pension, disability, investments etc.
This criteria works hand-in-hand with your down payment or the equity you already have in your property, as the greater the down payment or equity, the less a lender will be relying on your income.
The property you want to buy or refinance is the key. Our lenders are looking for properties that are both marketable and in reasonable condition. Under our equity lending programs, we can lend more on a property in a major urban center than one in a remote rural location. As the location becomes more remote, the overall lending value is reduced. For clients wishing to obtain higher lending values for remote or rural locations, there will be a greater reliance on their income & credit.
Other things that you should know before you start your property search:
Tiny homes or microcondos can be difficult to finance because they are a relatively new type of housing in North America. While there are a few lenders who consider these properties, when added to credit issues there may be fewer solutions that we can find for you.
Mobile homes are treated differently than single family homes or strata units by lenders, so these properties can also be challenging to obtain a mortgage.
If the property has an existing or previous oil tank, contains or may have contained asbestos, or has something else in its structure that would be disclosed in your real estate contract you’ll need to provide more documentation about the issue and the property. Again, not all lenders consider these properties but we will work to find a solution that fits.
When it comes to credit, good, bad or ugly, we don’t discriminate. We know from experience that no two clients have the same credit; that’s why we have multiple lenders with different lending requirements and solutions. These different lending practices allow us to offer a myriad of options to you, options that are not “beacon driven” but “common sense driven”.
If you are actively working to improve your credit score, there are many things you can do on your own to pay off debt and get your credit back on track. There is no “one size fits all” path, but many people find that creating a spending plan (a smarter, realistic budget) and using the snowball or avalanche method of debt payment are both helpful tools in creating more financial stability. If you feel that you need help to get your credit back on track, there are many professional solutions for bad credit including credit counselling, consumer proposal, and bankruptcy.
It is also important to remember that your credit is more than just the score. Your credit history matters, too, including the number of lines on your credit report, the types of credit you have, how much credit you use, your payment history, and the number and frequency of inquiries about your credit.
If you’ve had a past bankruptcy or consumer proposal, we can help you. We have mortgage solutions for such situations.
When you have less than 20 percent down, the policies are fairly “cut & dry”, because you’re required to get mortgage insurance either through CMHC, Genworth or Canada Guaranty. They all require that a previously bankrupt client be discharged a minimum of two years as well have two years re-established credit before an insured mortgage is offered with a five or ten percent down payment. Having said that however, if your two-year, post-bankruptcy waiting period is not yet past but you’re almost there, in some cases we may still be able to get you mortgage financing, provided you have a minimum of 10 percent of the purchase price.
Now, if you have 20% or more as a down payment, we have lots of flexibility when it comes to lending guidelines. In these situations, requirements both for the re-establishment of credit and time since discharge are varied amongst our lenders, and we’re confident we can find one that would work for you.
In addition, if you’ve recently just gotten out of bankruptcy or consumer proposal, or you are close to being discharged, and are looking for some guidance both on re-establishing credit and wanting to know what it will take for you to qualify for a mortgage in the not too distant future, start talking with our team to set a plan to reach your goals.
Lender/Broker Fees for a Bad Credit Mortgage
With bad credit mortgages, it’s the client that pays the mortgage broker for arranging a mortgage on their behalf. This fee is typically paid on closing and is usually based on a percentage of the overall mortgage.
Additional fees may be charged by our lending partners, if needed.
Our typical brokerage fees for mortgage scenarios as outlined above start at 1% of the total financing amount, and are usually deducted from the mortgage proceeds when your mortgage is funded. At Auxilium Mortgage, we pride ourselves on transparency. Once we’ve received your application and reviewed your file, we will discuss these costs up front, thereby avoiding any unpleasant surprises.
If you are looking for a bruised or bad credit mortgage, feel free to contact one of our Mortgage Professionals to find out how we can help you achieve your dreams of home-ownership. Based in Victoria, BC we work with clients locally, throughout British Columbia and across Canada to reach their goals.