As 2024 unfolds, Canadian homeowners find themselves at a crucial point in their mortgage – renewal time! In this article, I will explore the current dynamics of the Canadian mortgage market, what to expect when renewing your mortgage, and considerations to ensure a seamless process. If there’s a topic that homeowners are discussing in 2024…Read Article
Bad Credit & Private Lending Mortgages
Are you looking for a mortgage but bad credit has you down and out?
There’s still a possibility that you can be approved for a mortgage and purchase that home you’ve been looking at. This can happen through private or “B Lender” mortgages.
I often get asked about mortgages for people with bad credit. In this blog post, I’ll be sharing about private and “B Lender” mortgages and how even if you have bad credit, owning a home can still happen for you.
What is a private or B lender mortgage?
A B lender is an institution that offers options for the “B” customer. These institutions offer a lower barrier of entry to qualify for their products/mortgages. B lenders tend to offset that with higher interest rates.
Private mortgage lenders in BC are lesser regulated mortgage lenders, which tend to be a last-resort option for homebuyers in Canada. But, a great option for those people who still want to purchase a home but don’t qualify through A lenders or B lenders.
Reasons you may need an alternative mortgage lender.
There are several reasons why a B lender mortgage or private mortgage may be right for you. Some of the main reasons are the following:
- Damaged or bad credit
- Past bankruptcy or consumer proposal
- No credit
- Thin Credit (Haven’t had credit for very long)
There are many reasons a client or clients may need to get a higher-priced mortgage or private lending mortgages but the main point to remember is that it is still possible to get a mortgage at that point.
How do private mortgages work?
Private lenders in Canada typically require at least 20% or more equity in your existing property if you are looking to refinance or 20% or more down payment if you are looking to purchase.
The way I usually approach this with a client is I will first establish there are no other options for them through a full evaluation involving a meeting, credit check, income verification and assets or a possible co-signer.
There may be other scenarios to explore as it depends upon each client’s specific situation. It’s important to remember that just because you have been declined at one bank or mortgage broker does not mean you will be declined for a mortgage when you work with Mortgage Okanagan.
I’ve worked with my fair share of files where a client has been previously declined somewhere else, but I was able to get them a mortgage through a B lender or through a private mortgage.
This does not mean that I am able to make every situation work but I will have a solution for you whether it be working with me to improve your credit or another way to put yourself into a better position.
The B lender and private lender process.
If you do have to go through a B lender or private lender, there is a process and some information that you’ll want to know.
I’ve outlined the most important information below.
- B Lender and Private mortgage lenders rates will be higher than regular banks, usually in the range of 3% – 8% depending on credit, location, down payment and other factors. As of this writing, some “B” lenders have rates of 2.69% while private lenders tend to be higher.
- There are fees charged if the loan goes through, usually 1% of the loan amount and up depending on the lender’s risk profile
- An appraisal will be needed
- Most lenders will go up to 80% of the value of an appraisal but some will only go to 75% in smaller cities or towns.
- Most terms are 1 – 3 years
- Private lenders are very flexible and you can generally pay only interest and have a smaller or no penalty if with the right lender. ie: some lenders are much more expensive than others with more restrictive terms.
The plan is to move from a private mortgage.
You won’t want to stay with a private mortgage forever. It’s an option for you to be able to get a mortgage and after some time, you may be able to move up to a B lender or even an A lender.
The goal is to be refinance with a regular bank for better rates as soon, instead of renewing, as your term is up. We would help position you to do so. Once approved, follow your renewal date and be sure to reach back out to me before your term is up. Then, we can work together to get you a better rate through a different lender.
Bad credit doesn’t have to stop you from owning.
If you’re looking into a mortgage with bad credit, please know that this doesn’t have to stop you from owning a home. It’s possible to own your dream home and get a mortgage through a B lender or private lender depending on your situation.
Please give me a call at 250-826-3111, fill out the form below or do a pre-approval on my website. Once you reach out, we can discuss your situation and I can get to work on a solution for you! I look forward to hearing from you soon.