Canadian Mortgage Refinancing Part 1 – Refinancing Your Home When you Have Credit Problems

Refinancing your home when you have credit problems can be done with the assistance of an experienced mortgage broker who works with lenders that don’t mind helping someone who has experienced problems with credit.

The difficulty you experience when trying to find financing will depend on the type of credit problem you have. Canadian mortgage refinancing has come a long way in the past 20 years. More lenders are willing to work with someone who has credit problems.

Before the last decade, the primary choices as it relates to mortgage refinancing in Canada were the bank or a private lender. In the past decade however, a host of companies have emerged that will offer bad credit mortgages. These include mortgage investment corporations, trust companies and finance companies.

Generally consumer’s who have credit problems that are currently impacting their credit or recently impacted their credit, will find that lenders will approve them on an equity basis. This means that if the client does not have equity, it will be less likely they will be approved. The rule of the thumb that most equity lenders follow is that they will lend between 75%-80% of a property's value including the new funds required.

We mentioned that the difficulty you experience will depend on the type of credit problem you have because some people think that their credit problem is much worse than it actually is. Lenders that will lend to a consumer who has had credit problems will usually look at a few primary factors.

What is the credit score? While many private lenders will not have a minimum credit score, finance companies and trust companies who will consider a bad credit loan will have a minimum “credit score threshold”. When refinancing your home, the minimum credit score could be 550, 580, 600, and sometimes 620. When a credit score is below 550, you will almost always have to obtain mortgage refinancing through a private lender.

Is there a history of recent late payments? If the borrower has made many late payments to loans and credit cards within the past year or two, this too could impact their ability to get a mortgage with a finance company or trust company and will likely mean that you will have to consider a private lender.

Someone who has previously had a bankruptcy or consumer proposal that was completed at least 2-3 year ago and they have 2-3 years of solid re-established credit, may not be considered as having credit problems at all. The same is true for a client who in the past year has only make one or two late payments but has paid all other credit well and all accounts are up to date and in good standing.

The best thing you can do if you think you may have credit problems and want to apply for Canadian mortgage refinancing is speak to your local mortgage broker. They will be able to review your credit with you, talk to you about what options are available and secure a mortgage for you.

For more information about Canadian mortgage refinancing or refinancing your home when you have credit problems please contact Paul Mangion at GTA Mortgage Matter by calling 416-204-0156 or visiting www.gtamortgagematters.com