If you’ve been turned down for a mortgage by a major bank or another mainstream lender, you may be wondering what options are available to you. As mortgage rules and regulations increase in Canada, more homeowners are struggling to secure a mortgage through traditional means.
The good news is that you’re not alone and that options exist to help people who need a second chance, due to late credit cards payments or more serious issues. If you don’t qualify for traditional mortgages or fit the guidelines of mainstream lenders, you may be able to get a mortgage through a second chance mortgage lender.
Watch the video below to learn more about how you can get a second chance:
In this article, we’ll explain why second chance lenders may be the right option for you, tell you what to expect from your mortgage application, and show you how to find the right second chance mortgage lender in Canada.
Bruised Credit: Why You Need a Second Chance
Second chance mortgages are a great options for those with bruised credit. This typically will include credit ratings ranging anywhere from 300 to 650. At Main Street Mortgage, we find that most people have poor bruised credit as a result of tough life situations, such as:
Typically, mainstream financial institutions like the major banks and credit unions will not give you a mortgage if you have a credit score below 600. However, there are a wide number of Alt-A and B lenders who may give you a mortgage if your credit score is between 550 and 700. There are also private mortgage lenders who will provide mortgages to individuals with credit scores below 600.
At Main Street Mortgage, we make it simple for people in any situation to access a mortgage. We specialize in providing alternative mortgage solutions from a network of over 200+ Alt-A and B lenders in Canada. To learn more about these alternative lending options, connect with one of our mortgage specialists.
Second Chance Mortgages Programs
If you are dealing with bruised credit, it may be the result of missed or late payments for credit cards, loans, or a past mortgage. You may even be recovering from a divorce or separation, a consumer proposal, or even a personal bankruptcy.
Whatever your situation, there are a programs available in Canada to give you a second chance and help you secure a mortgage:
Mortgages After Divorce or Separation
If you recently went through a divorce or separation, you may be suffering from a bruised credit rating. This poor credit is typically caused by missed or late payments on joint credit cards, billing accounts, or even previous mortgages.
Dealing with a divorce can be an emotional time and you may need support to properly manage your finances in this situation. Learn more about your options for mortgages after divorce or separation here.
Mortgages for Discharged Bankrupts
If you are anticipating that you will be discharged from bankruptcy or clear a consumer proposal soon, you should start planning for your next mortgage now.
Certain programs will allow you to apply for a mortgage the day after you’re discharged. Get your life back on track as soon as possible — learn more about these programs here.
Tips for Your Second Chance Mortgage Application
Applying for second chance mortgage is similar to a regular mortgage application in many ways. It will still take the same factors into account, when determining what type of mortgage is available to you. These factors will include:
- Your credit score
- Your current income
- Your down payment
Check Your Credit
If you are looking to apply for a second chance mortgage, you will want to make a credit check to understand what credit ratings is available to you. To check your credit in Canada, you can use one of Canada’s major credit bureaus, Equifax or TransUnion, to request this information.
If you have successfully built your credit back to above 600, then you may be able to secure a mortgage through traditional lenders. If not, you will want to connect with an Alt-A or B lender who caters specifically to people with lower credit ratings.
Save for a Larger Down Payments
In this situation, it is important to save a larger down payment for your home. Individuals with bruised credit will typically need to provide higher down payments because they present a greater risk to the lender.
Often, second chance mortgages require you to pay 20-25% down. However, while this is a large sum of money upfront, it can help you to negotiate a better mortgage rate because you have more equity in your home.
Expect Extra Fees
In addition to a larger down payment, you should save enough money for the extra fees associated with a second chance mortgage application. Your lender may charge up to 1% of the mortgage value for processing your application, in addition to your down payment.
Be Ready for High Mortgage Rates
If you’re applying for a second chance mortgage, you should be ready to have mortgage rates that are typically 1-2% higher than you would expect through an A lender.
Alt-A and B lenders are only able to offer mortgages to individuals with poor credit if they charge higher interest rates. If you want to avoid these rates, we recommend that you take some time to build up your credit before applying for your next mortgage.
Finding the Right Second Chance Mortgage Lenders
With a large number of Alt-A and B lenders available, it can be tough to know who will be the best fit for your specific situation. If you haven’t had success securing a mortgage with a big bank or financial institution due to your poor credit, Main Street Mortgage can help to connect you with our network of 200+ Alt-A and B lenders and recommend the best option.
Remember that getting a second chance mortgage is usually a short-term option. It’s our goal to help you get a mortgage, build your credit and eventually switch to a lower interest rate with an A lender in the future. We are here to provide a long-term mortgage solution that will help you get your life back on track.