Financial troubles in your past, even if they weren’t yourfault, can lead to big financial problems later, especially when trying to geta 2nd mortgage. You’ll find it’s very hard to get a good interestrate for a mortgage when you have bad credit, if you’re able to get approved atall.
Part of the reason that 2nd mortgages are moreexpensive with low credit is because the lender sees you as a higher risk. Evenwhen your loan is secured with your house, interest rates can vary depending onhow good your credit score is. The best private mortgage lender rates can bequite a bit lower than the worst rates, so it’s best to make sure your creditscore is as high as possible. Even if you aren’t able to improve your creditbefore getting a private second mortgage,there are a couple things you can do to get a better private second mortgagerate.
· Increase your down payment
o Bringing more money for your down paymentreduces the risk to the lender, which they reward by giving you better interestrates. The best private mortgage lendersusually ask for around 15% down payment when you have bad credit, but thatnumber can be higher depending on how low your credit is and which lender yougo to.
· Switch to verified income
o If you’re self-employed, many mortgage brokerswill offer to work with your stated income, which is not verified. By going on therecord with your finances, you can access lower rates.
· Get a professional property appraisal
o Some 2nd mortgage programs don’trequire a property appraisal before giving you the funds. That saves you a fewhundred dollars up front, but comes at a higher interest rate. It’s a goodoption for people who worry that an appraisal may show that your home is worthless than you believe it is, but is more expensive.
· Get a co-signer
o Bringing on a co-signer to your mortgage is anexcellent and quick way to reduce your interest rate. Private mortgages for bad credit are hard to get without aco-signer because a low score means you aren’t as financially trustworthy. Aco-signer will improve private second mortgage lenders’ confidence in the deal.That being said, it’s not always easy to ask someone to become a co-signer.It’s a huge financial obligation to make, even if they won’t be responsible forthe payments, because they’re at risk if you stop paying.
Without having an in-depth look at your financial situation,there’s no way to give an easy one-size-fits-all answer to how much mortgageyou qualify for. We recommend using a private mortgagecalculator such as this one to get a good idea of what you might qualifyfor.
Because of the nature of private mortgages, you may besurprised to hear that the best privatemortgage lender in the GTA is someone you may have never even heard of.
There are hundreds of private mortgage lenders in Canada –even more than the number of traditional mortgage lenders. There’s so manybecause typically a private mortgage lender doesn’t have a lot of clients atone time – at least not as many as a bank would.Private mortgage lenders also rarely advertise.Instead, they rely on mortgage brokers to bring them business, so it’s likelyyou’ve never even heard of the brand before.