Many people who have been turned down for a loan by the bank can feel as though they don’t have any options left. One of the most common reasons that banks reject mortgage applications is because the applicant’s credit score is too low and presents a risky loan for the lender. Most banks will require a minimum credit score of 680 and will deny loans to those who score less than the 680 benchmark. Is it still possible to get a loan with poor credit? The short answer is yes.
If you have been denied a loan by the bank or are unable to find a lender who can provide you with a mortgage loan, you may want to consider the services of a subprime mortgage broker. Mortgage brokers act as middlemen between borrowers and lenders and have a vast amount of experience helping people who have been turned down for a loan get a mortgage or use their home equity for a home equity loan.
Mortgage brokers have an advantage over the bank in that they can shop around with different lenders and get the best interest rate, terms, and fees. Banks on the other hand are limited to their own product options.
Subprime mortgages are gaining in popularity as more Canadians find themselves faced with unexpected life events that they can’t manage financially. In fact, 1 in 10 mortgages in Canada are considered ‘subprime’. For anyone who has fallen on hard times and finds that their credit rating has been damaged, as a result, have a higher likelihood of being approved through a subprime lender as opposed to traditional banks.
What is a subprime mortgage?
Subprime refers to a borrower who does not classify as a prime mortgage loan candidate through one of Canada’s chartered banks. A subprime mortgage is typically given to anyone who has a lower credit rating or income that is difficult to verify such as freelance or self-employed. Anyone can apply for a subprime loan – even those with excellent credit because the loans are appealing for their varied structures and flexible repayment options.
Subprime lenders are private financial institutions that typically do fall under the same regulatory framework as Canada’s chartered banks and credit unions. That is the main reason that they are able to lend to people with less than stellar financial profiles. However, due to the fact that they lend to people in more challenging financial situations, the interest rates are slightly higher to offset the increased risk to the lender.
When to consider a subprime mortgage lender?
Essentially, you should reach out to a subprime mortgage lender if you find yourself in any of the following situations:
- If you can afford the cost of homeownership but have been denied by the bank
- If you have poor credit
- If you are self-employed, freelance, or earn commission-only income
- If you have been faced with a consumer proposal or bankruptcy
What products and solutions does a subprime mortgage broker offer?
Many subprime mortgage brokers offer a variety of solutions in order to suit the unique need of the borrower. Some of the most common include:
Home Equity Loans or Home Equity Line of Credit (HELOC) – A home equity loan or home equity line of credit (HELOC) is a loan that uses the equity of one’s home as collateral. For homeowners who have owned their home for a long period of time have accumulated equity that they can use towards their financial goals. If you are struggling financially, taking out a home equity loan can give you access to fund to consolidate debts and create a better long-term financial position for yourself.
Second Mortgages – Utilizing built-up home equity by securing a 2nd mortgage can be a great borrowing option for most. For most people, their home is their sole real estate investment. Utilizing a 2nd mortgage is a great way to tap into your home equity and gives you the freedom to use the wealth you’ve acquired as you see fit.
Mortgage Refinancing – Refinancing a mortgage involves replacing your existing loan with a revised one at lower-interest rate or better term. Homeowners often go about refinancing because of the potential benefits they can reap including being able to consolidate outstanding debt.
Debt Consolidation – Debt consolidation refers to the process of reorganizing and refinancing your current debts, so they are more manageable. Finding your way out of debt can seem like an impossible feat, but it doesn’t have to be. Whether or not you have bad credit, maxed-out credit cards or other issues that have put a damper on your financial standing, obtaining a debt consolidation loan is a great option to get back on track.
Bridge Financing – Bridge financing, also known as a bridge loan, refers to temporary loaned funds secured by your existing home that bridges the gap between a home’s sales price and the new mortgage. Homeowners most commonly consider this financing method when they to make a quick purchasing decision without worrying if the existing house has sold yet. When you sell, you can use the proceeds to pay off the loan and any accrued interest.
Stopping Power of Sale – When a borrower fails to make the agreed-upon payments on their mortgage, a lender has the option to begin a Power of Sale process to recoup their money. A Power of Sale can also happen if the borrower is using the property for an illegal purpose, if they have not kept the property in good condition, haven’t paid their mortgage or property taxes, or they don’t have adequate property insurance. A subprime mortgage broker can help with the entire power of sale process and help make sure you remain in your home.
Subprime mortgage lenders are gaining in popularity in a large part due to the fact that they fill a huge gap in the lending market. Hardworking Canadians who have the ability to repay their debts are being turned away by the banks and subprime lenders help to fill the void.
Subprime lenders are working to help Canadians get a second chance to secure a loan and obtain affordable housing or use their existing home equity to reach their financial goals. For many, this second chance means an opportunity to rebuild their credit, pay down the debt and create more financial stability for the future.
Burke Financial specializes in subprime mortgages to help Canadians reach their full financial potential. Every homeowner’s experience is unique, which is why we treat every client with the utmost care. We offer a personalized approach and work closely with our broad network of lenders to provide our clients with a high level of service. Our award-winning team will listen to your unique needs and build a solution for you that will help you fulfill your dreams. Your brighter financial future starts here. Call us today to discuss your options.
