Category: Credit score

Poor credit: How a private mortgage can let you own property

Mortgage for bad credit : Tips to get a private mortgage

A poor credit file shouldn’t necessarily keep you from a life project as important as buying property. No one is immune to difficult financial situations, and anyone who has regained control over their budget should have a second chance to get a mortgage. If conventional financial institutions keep putting up roadblocks, I’ll explain how and why a private mortgage can help you achieve your goal of owning real estate.

You are not defined by your credit file

The credit file compiled by Equifax and TransUnion, with their unclear point systems, is a far-from-perfect tool. It’s obvious to me that it is an outdated, if not archaic, system. Certainly, a credit rating can offer a vague idea of your profile as a consumer and borrower, but it only reveals a small part of your history. Not only do we often find mistakes in the file, but the credit rating is calculated from data that can easily distort reality.

Unfortunately, the banks or Desjardins branch advisors no longer have much freedom to judge your actual capacity to repay a mortgage. Instead, it’s the computer that decides.

After talking to several mortgage brokers, I can confirm that many people have suffered for the small errors of their youth or for simple oversights. Some, investors and self-employed people, who are visibly financially well off, can also have trouble getting a loan.

If you have a credit rating under 600 (out of 900), the banks won’t touch you, even if you’ve resolved the situation, earn a good salary and have the down payment needed. You’re just a number, one of the millions of clients—despite what their ad campaigns want us to believe.

The advantages of private mortgage financing

An analysis rooted in reality

Unlike the mortgage advisors of a bank or credit union, a private lender is able to analyze your request for financing based on your current financial reality. They aren’t forced to base their decision on a flawed credit rating to help you buy a home.

In fact, private mortgages are generally approved on the basis of the desired property’s market value. And, naturally, your income and ability to repay also come into play.

Here, we judge the financial transaction on its own merits. Abstract scores, ratings and debt ratios have no impact. To put it frankly, we don’t care if you took a few months longer to pay off your car loan in 2015. And we won’t penalize you because you’re a savvy investor who uses debt as financial leverage.

A fast, simple approval system

While conventional mortgage lenders love paperwork and endless procedures, private lenders value efficiency.

Just take a few minutes to fill out an Online Financing Application to determine the amount you could get.

A request for financing that doesn’t impact your credit file

Did you know that just submitting a financing request with a bank can affect your rating?

It’s true. If you approach several institutions for a loan, this is considered a worrisome sign by the Equifax and TransUnion credit agencies, who can reduce your credit rating.

But that’s not the case for an alternative financing solution with Victoria Financial, because no credit investigation is required at the time of the request for financing.

Flexible terms, according to your needs

The repayment terms of conventional mortgages can be restrictive. As absurd as this sounds, you may not be able to pay part of the interest in advance to reduce your monthly payments.

Since private lenders are not governed by strict corporate policies, they have the freedom to offer terms that are adapted to your needs, such as reduced monthly payments or the opportunity to pay the interest in advance.

Criteria to get private financing

Eligibility criteria vary from one lender to another. Here are the main criteria at Victoria Financial:

The property must be a single-family home, a condo or a commercial or income building.
The property must be located in a serviced urban area.
The amount of financing must be equal to or less than 75% of the value of the property.

This last criterion of course implies that you have accumulated a comfortable sum to invest in a property. As I mentioned earlier, even if you’ve made a big effort to save and show budgetary discipline, the banks still risk ignoring you for as trifling a reason as an old cellphone bill that wasn’t paid. And if you’ve had the misfortune of going through a difficult period in the last few years that forced you into debt consolidation, consumer proposal or bankruptcy, your odds of getting a mortgage from a conventional bank are practically zero.

Thankfully, the private lender has the vision needed to recognize that you are not defined by your past.

Takeaways

I admit I’ve been a bit harsh with the banks and credit unions. But I think it’s fair enough when we see how they use their virtual monopoly to decide your future. They obviously have a role to play and are a must for those who want to only put down 5% on a property.

But if they keep putting wrenches in the wheels of your life plans, it’s time to consider a private mortgage.

It doesn’t cost anything to explore this solution. And you won’t have to worry about it making a negative impact on your credit file.

How to restore your credit: Our expert advice

How can you re-establish credit after a bankruptcy or consumer proposal?

Debt problems can happen to anyone: the neighbour, you or me. And when the mountain of debt becomes insurmountable, we may find ourselves faced with the choice to either make a consumer proposal and negotiate with creditors to repay the debts as much as possible, or declare bankruptcy.

Regardless of which option you choose, you will have to try to improve your credit afterwards. But how do you go about increasing your credit rating after either of these events?

In this article, our team shows you how to rebuild your credit following a bankruptcy or consumer proposal. Then, we’ll look at how a private mortgage product can help you get cash when traditional banks and financial institutions turn their backs on you while you are rebuilding your credit.

How to boost your credit rating after a bankruptcy or consumer proposal

You probably already know this but declaring bankruptcy negatively impacts your credit report. In fact, going bankrupt lowers your credit score. A first bankruptcy will stay on your credit report for 6 years with Equifax and 7 years with TransUnion. A second bankruptcy will remain on file for 14 years. That’s a long time, a very long time.

However, it’s always possible to restore your credit after a bankruptcy or consumer proposal. Here are some recommendations to help improve your credit rating:

Open a savings account and make regular deposits

Opening a savings account and regularly depositing money in it helps you look good to financial institutions. In addition to helping rebuild credit following a bankruptcy or consumer proposal, this money in the bank will also be useful when applying for a new loan.

Apply for a secured credit card

A secured credit card requires a security deposit. Why? The deposit is used to protect the lender if ever the cardholder can no longer repay the balance on their card. The deposit amount is typically 1 to 2 times the credit card limit.

A word of advice: only take out one credit card and pay off the balance in full every month to help increase your credit rating. Plus, keep your credit card usage below 30%. And, finally, pay all your other bills on time too (electricity, mobile phone, internet, etc.).

Request a copy of your credit report

A credit report can contain errors, which could give lenders a bad impression. Getting a copy of your credit report, regardless of your financial situation, is a good way to make sure the information it contains is up to date.

Talk to your banker or personal finance advisor

Talking to your banker or a personal finance advisor can sometimes be very helpful in finding ways to improve your credit following a bankruptcy or consumer proposal. We invite you to contact your banker to find out more about the actions you could take to restore your credit. Or, contact us: our team will be very happy to answer your questions.

Obtaining additional funds with a mortgage when you have bad credit

Borrowers with bad credit have fewer mortgage options, because personal bankruptcies and consumer proposals make banks and traditional financial institutions cautious.

A bad credit rating is one of the 6 most common reasons for being rejected for a traditional mortgage.

Banks and traditional financial institutions place high demands on people who are rebuilding their credit. Notably, before granting you a loan, they will require that your credit report be up to date, compliant and free of errors. In addition, they will ask that you have been released from your bankruptcy or consumer proposal for at least 18 months and that there have been no negative entries during your recovery period.

These requirements and the many others that go with them are obviously not easy to meet for someone who is currently in or coming out of a financial bind.

So, how do you get a loan after a bankruptcy or consumer proposal? With a mortgage for bad credit, available from private lenders.

This mortgage loan is intended for people with a bad credit history: buyers who do not have the capacity to meet the demands of banks and traditional financial institutions.

The advantage of private lenders is that they usually have more flexible eligibility criteria. To qualify for this mortgage product when you have bad credit, you first must own a single-family home condominium, or a commercial or income building located in an urban and serviced area. Second, the sum of the current mortgage and that of the second mortgage must be less than or equal to 75% of the value of your property.

That’s it!

Applying for a mortgage with bad credit is also really quick and easy. You might even receive same-day approval once the online application form is completed and submitted.

Restoring your credit with a mortgage when you have bad credit

No one is immune to financial hardship. Declaring bankruptcy or having to make a consumer proposal can happen to anyone. But, even though these 2 avenues leave a mark on your credit file, it is always possible to rebuild your credit.

In the meantime, the mortgage for bad credit situations offered by private lenders will help you quickly obtain additional funds by using the net equity available on your property, without affecting your overall finances.

To learn more about this financial product, visit the Victoria Financial website.

How to boost your credit score: dos and don’ts

We all know that having a good credit score is important when applying for a mortgage from a traditional banking institution. In fact, it is the most important factor considered by banks and without a good credit score (700 and above), your application will probably be refused. If you have a low credit score, you will have to take out a mortgage loan with a bank that accepts sub-standard applications (e.g. Equitable Bank) or go with a private lender like Victoria Financial.

Here are the dos and don’ts of rapidly boosting your credit score:

1. Pay more than the minimum balance owed on your credit card

Ideally you should pay off your credit card balance every month. If this is not possible, plan to pay more than the minimum amount owed because this will help build your credit.

2. Always pay your bills on time

Paying your bills late will lower your credit rating. So always make your payments on time. Many companies, including telephone and cable providers, will report your payment history to credit bureaus. So pay all your bills on time, even the small ones.

3. Keep your balance under the radar

Do not use more than 30% of the available capacity of your credit card. If you frequently need to use more than this recommended percentage, consider applying for a credit limit increase.

4. Opt for automatic bill payments

If you regularly forget when bill payments are due, consider opting for pre-authorized debits. This will make sure you have no missed payments on your credit report.

5. Don’t have too many credit cards and loans

Having more than one credit card and many types of loans will increase your debt ratio and hurt your credit score. If possible, consolidate your loans into a single loan by refinancing with a bank or taking out a second mortgage.

6. Don’t close old unused credit cards

The longer your history runs, the more you increase your credit score. Old credit cards should therefore be left open, even if the balance is zero.

7. Build a solid credit history

Your payment history is a huge factor in your credit score. Your good habits will increase your score in the long run.

How can I apply for a mortgage loan?

Apply online via our website or call our underwriting department at (877) 220-7738, extension 1.

Minimum monthly payments on credit cards increase to 2.5% of current balance

It is obvious that credit cards are a major burden for a large part of the population. In fact, two in five credit card holders fail to pay off their monthly balance.

In order to avoid over-indebtedness, the Quebec government has implemented new rules under the Consumer Protection Act. Starting August 1^st, credit card holders in Quebec must now repay a minimum of 2.5% of their credit card balance instead of the previous 2.0%. Furthermore, the repayment rate will then increase by 0.5% every year until it reaches 5% in 6 years.

The harmful effects of this new increase

Imagine you have a credit card balance of $25,000. Now you will need to pay a minimum of $625 monthly, an increase of $125 over last year. While this may seem like a small increase, it can in fact destabilize an already tight family budget.

The impact on credit scores

Using a credit card can have both positive and negative impacts on your credit score. On the positive side, not using more than 30% of its capacity is good for your credit score.

On the negative side, maintaining a high balance or not being able to make the minimum payment will negatively impact your credit score.

Consolidate your debts with a private mortgage

Consolidating your credit card debt using a private mortgage loan can be an attractive solution for reducing your monthly charges. Even though the interest rate is high compared to a conventional mortgage, payments will definitely be lower than what credit cards charge. For example, a loan of $25,000 will require monthly payments of $312.50 instead of $625.00. This is a 50% reduction in your monthly payment!

How can I apply for a mortgage loan?

Apply online via our website or call us at 1 (877) 220-7738, extension 1.

Borrowers with a poor credit rating have less mortgage loan options

You want to get a mortgage loan, but you have a poor credit rating. What happens when a company like Home Trust, which juggles this type of credit request on a daily basis, also experiences liquidity problems? The company founders, relinquishing a part of the market to private lenders, thereby making it easier for you to get a loan.

What is Home Trust?

Home Trust is a trust corporation that focuses on borrowers that do not meet all the lending criteria of traditional financial institutions. The company targets borrowers with a poor credit rating, a fluctuating income, and financial difficulties. A few years ago, Home Trust was one of the biggest players in its field. They were making life difficult for private lenders by offering competitive interest rates.

However, the corporation recently experienced numerous complications within their organization. First, competitors arrived on the scene and made their presence felt, making life difficult for Home Trust. Take for example Equitable Bank, currently the ninth largest independent Canadian bank.

Then, in 2015, Home Trust faced accusations of fraud, when mortgage brokers provided fake documents when underwriting loans. The result? Huge numbers of investors went elsewhere, and there was a loss of more than 600 million in market cap.

It seems as though there had also been issues at the administrative level for some time. Regardless, their share values continue to drop, and several executive managers have left the organization.

Market impact

Home Trust is in a downslide and their capital costs have significantly increased. We can expect that it will tighten its finance criteria as a safeguard. Since its clientele consists mostly of people experiencing financial difficulties, we can predict that its revenue will continue to drop in the short and medium term.

This gives private lenders the opportunity to stand out from their competitors by offering Home Trust’s target clientele benefits that they no longer have access to. As explained in my article Why get a private mortgage instead of a conventional mortgage?, private lenders like Victoria Financial offer financing to people with a poor credit rating, at competitive rates.

There are numerous benefits to taking out a mortgage loan with a private lender, because a loan application request will be accepted, even if you have:

A fluctuating income.
A poor credit rating.
Unpaid taxes.
A prior bankruptcy.

Regardless of your reasons for choosing a mortgage loan, save precious time by going with a company that will readily accept your application.

After reading about the numerous benefits of taking out a loan with a private lender, choose the most viable and effective solution!

Contact me via email at maxime.st-laurent@financierevictoria.com or by phone at 1 (877) 220‑7738, ext. 101. Whether you are facing financial difficulties or not, we can help you.

Financing your flip is getting easier!

House flip pros will tell you that private financing is the way to go if you want to take advantage of housing market opportunities.

Are you dreaming of flipping a house that was either repossessed or inherited? Whether or not you have flipped a house before, do you need funding?

The key to financing your flip: Speed

Unlike private mortgage lenders, banks ask you to complete page after page of application forms and they take a long time to analyze your files. In the time it takes them to process your files, you will likely risk losing the building that you had hoped to make a profit from.

Flipping houses is a bit like investing in the stock market. You always have to be on the lookout and your have to draw more quickly than your competitors as soon as an opportunity presents itself.

If you go with a private mortgage lender, you can get a letter of approval the same day

Actually, you can get a letter of approval on the spot. Being able to make a purchase offer with no financing conditions will give you a competitive advantage.

Did you know that if you go through a private lender, you will be able to receive financing within a few days? Even if;

the property needs major repairs;
the banks have refused a loan based on your credit rating or because your debt-to-credit ratio is too high;
you have declared bankruptcy or have submitted a consumer proposal;
you have no capital, but you have other property assets and plenty of equity;
And if your file is well prepared, private financing will allow you to obtain funds in less than one week.

Do you know why financial institutions refuse to finance flips?

Banks don’t make a lot of money on short-term loans;
They hesitate when it comes to taking risks (i.e. a legal construction hypothec);
Banks are scared of the idea of being stuck with an empty house on which the renovations have not been completed;

Two words to remember: flexibility and simplicity

First, the process of obtaining private financing through Victoria Financial is much easier than going through a bank. Here’s all we need from you:

The address of the property in question;
A list of the work that needs to be done, as well a proof of funds required to complete the work.
The amount of money you would like to borrow;
The property value (the amount paid);
A certificate of location, if you have it;

Secondly, here are some general financing terms that you will encounter when you finance a house flip:

Short-term loan (6 months or more);
Financing for up to 75% of the market value;
Possibility of receiving 100% financing if you own other buildings and have plenty of equity to guarantee the loan;
Monthly interest-only payments;
No bankruptcy or insolvency records search, no credit check, no income verification.

Of course, certain conditions apply. The interest rate for private mortgage loan starts at 12%, a rate that often causes borrowers to hesitate.

Even if the role of the private mortgage lender is a passive one, the private lender has to be seen as a financial partner and not as a traditional capital source. Furthermore, going through a private mortgage lender will make it possible for you to flip more than one house at a time if several opportunities become available.

You might pay a higher interest rate, but if you are in a position to make a considerable profit when you sell the property you’re flipping, it really is worth the money.

Contact me via email at maxime.st-laurent@financierevictoria.com or by phone at 1 (877) 220‑7738, ext. 101. I will help you calculate the profit on your next flip.

Taking out a second mortgage? Skip the financial institutions!

A second mortgage is a mortgage that is taken out on a property that is already mortgaged.

You can take out a second mortgage with either a financial institution or a private mortgage financing company.

Why go through a private mortgage financing company instead of a conventional financial institution?

There are several advantages to choosing a private mortgage financing company over a financial institution.

Your credit score doesn’t matter

First, the biggest advantage is that it doesn’t matter what your credit rating is. If you go through a bank for this type of mortgage loan, you generally need a credit score of at least 650 points. If you go through a private mortgage financing company to secure a second mortgage, your credit score has no bearing.

Did you use a bankruptcy trustee?

Secondly, your financial institution will refuse your request for a second mortgage if you declared bankruptcy in the past 5 years or you were not discharged from a consumer proposal, as this means that there is still a blemish on your credit report.

Private financing is much more flexible. If you still own your property, the fact that you have declared bankruptcy or have submitted a consumer proposal will not impact the decision of the private mortgage financing company.

No income verification

Another point worth mentioning is that, unlike financial institutions, private mortgage financing companies will not require an income verification. If you find yourself in a difficult situation (for example, you’ve lost your job), not needing to have your income verified can only be seen as a win-win situation.

Monthly payments: Just pay interest

Private mortgage financing companies also allow you a degree of flexibility when it comes to your monthly loan payments. Depending on the options you choose, you can reduce your payments considerably.

One option is to only pay back the interest over a given period. You won’t touch your capital amount, but at least you can reduce your monthly disbursements.

Example: One of our clients had a second mortgage for $25,000 with a financial institution. His monthly payments went up to $625.00. With Victoria Financial, his payments went down to $312.50, a reduction of 50%!

Why opt for a second mortgage?

There are many reasons why you might choose to take out a second mortgage loan.

You are in financial difficulty

If you are experiencing financial difficulties, a second mortgage gives you the chance to get back on your feet. Because you don’t have to provide a credit report or undergo an income verification, everyone benefits.

You can use the amount borrowed to:

Consolidate any lingering debt;
Adjust your credit;
Mitigate the effects of being between two jobs and not having a salary;
Help you if you have a work-related accident;
Temporarily overcome the loss of a major client if you are self-employed.

Being able to make these and other related payments means you can maintain a good credit rating and you don’t have to worry about paying your creditors late payment fees.

You are starting a new business (or getting your business off the ground)

You could also benefit from a loan if you want to get a business started. Especially if you are transitioning between your current job and getting your new business started. A loan can also provide the money you need for an initial capital outlay.

Financial institutions need to know your income. Under situations such as these, they will not grant you a loan. Private mortgage financing companies can help make your business dream a reality. You can repay your loan at a rate that best suits your situation.

You are planning a renovation

Are you planning a major renovation project? You might need to take out a second mortgage to help cover the cost of materials and pay the contractors.

Renovations also increase the market price of your property. Your renovation is an investment that will help you build up the equity on your property. Later you can then refinance through your conventional financial institution, or resell.

Now you are familiar with the key benefits of choosing a private mortgage financing company over a financial institution. If you take on a second mortgage, do you still think you’ll go the conventional route?

If you would like more information on second mortgages, please don’t hesitate to contact me, either by email at maxime.st-laurent@financierevictoria.com or by phone at 1 (877) 220-7738, ext. 101.