Yes, often. Equity changes the conversation entirely, and a credit score that would stop you dead at a bank is frequently workable when there is a house behind it.
Why equity matters more than the score
An unsecured lender looking at a 560 score sees only risk. A lender secured against a home with 40 percent equity has a very different picture, because if things go badly there is real property behind the loan.
That is why the mortgage world has options that the credit card world does not.
The three tiers
A lenders, the big banks and the main monoline lenders. Generally want a score around 680 and clean recent history. Best rates.
B lenders, alternative lenders built for exactly this. They will look at scores in the 500s, at past consumer proposals, at bruised history. Expect a rate premium of roughly one to three percent and a lender fee of around one percent. Usually a one or two year term while you rebuild.
Private lenders. Score barely matters, equity is nearly everything. Rates in the high single digits to teens, meaningful fees, short terms. A tool for a specific problem, not a place to live.
What the numbers usually need to look like
Most B lenders want you at or under 80 percent of your home’s value. Private will sometimes go higher. The more equity you have, the less your score matters and the better the terms get.
Why it can still be worth it at a higher rate
This is the part people miss. If you are carrying 60,000 at an average of 19 percent, moving it to 8 percent is an enormous improvement even though 8 percent sounds high next to a prime mortgage rate.
The comparison that matters is against what you are paying now, not against the best rate advertised to someone with perfect credit.
The plan matters more than the product
I will not place one of these without talking about the exit. The point of a B or private solution is to clear the high-interest debt, let your score recover with the balances gone and the payments clean, and refinance into an A lender in one to two years.
Done that way it is a stepping stone. Done without a plan it becomes an expensive place to be stuck.
If you have already been declined
That is normal and it is not the end of it. A bank saying no means their rules said no, not that nothing exists. Bring me the file they turned down.
If credit has been getting in your way, would it help to find out what you could actually qualify for?
General education, not financial advice. Figures are illustrative and subject to lender approval (O.A.C.). Lora Fenn, Mortgage Agent Level 1, Lic. #M25003153. Dominion Lending Centres YBM Group, FSRA #11129. 705-881-2780 · lfenn@dominionlending.ca
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