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Can I Refinance Mortgage With Bad Credit?

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Can I refinance my mortgage with a bad credit score? The answer is NO. You may not qualify for a refinance loan if you have an adverse credit history. When you get a mortgage loan, one of the first things lenders do is check your credit score – good or bad.

This is to ensure that their money will be secure, and in addition, they want to make sure that they get the best deal possible from their borrower. However, even though there are lenders who cater for borrowers with indifferent credit scores, it is never advisable because this could also put your property at risk.

This article will inform you of the minimum credit score required to qualify and additional factors to consider before submitting a mortgage application. We will also learn whether there is any possibility of refinancing my mortgage with a bad credit score or not.

Minimum Credit Score Needed for an Insured Mortgage Refinance

On July 1, 2020, Canada Mortgage and Housing Corporation will raise the required credit score for insured mortgages from 600 to 680. (CMHC). Industry observers had mixed feelings about this significant increase. Many others believed the new standard was highly restrictive and would keep too many Canadians from entering the real estate market.

At least one mortgage borrower is subject to the CMHC-set minimum score. Since only one borrower’s credit score must be higher than 680, couples are granted a bit more leeway.

Minimum Credit Score Required for a Conventional Mortgage Refinance

A down payment of 20% or more qualifies for a conventional mortgage. There are fewer minimum credit score requirements restrictions because conventional mortgages are not subject to CMHC insurance requirements. Each lender will adhere to its own set of rules.

The number of mortgage lenders prepared to approve your mortgage will be pretty minimal, but it is still feasible to get authorised for a mortgage with a credit score as low as 600.

What is a Good Credit Score in Canada?

You might be curious as to what constitutes a good credit score. Credit scores in Canada range from 300 to 900, albeit very few people fall at the extreme ends of the spectrum. The majority of Canadians have credit ratings that range from 600 to 800.

According to the government, the average credit score in Canada is between 650 and 725. A score of 600 is below average and points to a borrower who poses a greater risk. You have a lower chance of obtaining loans from banks and other traditional financial institutions if your credit score is between 560 and 659.

Ranges are used to set credit scores. Here is a breakdown of each level to help you understand how the levels are divided.

  • 800 or higher is regarded as excellent.
  • Scores between 720 and 799 are regarded as excellent.
  • You are considered to have a good credit score if it is between 650 and 719.
  • Fair is defined as 600 to 649.
  • A credit score that is below 600 is considered to be poor.
  • How to view your credit rating

Before applying for a mortgage, it’s a good idea to check your credit score and obtain a copy of your credit report. There are a few ways to obtain this knowledge for no cost. One approach is to ask the credit bureau for a copy of your credit report. I’ll describe how you can accomplish this while outlining why I don’t advise doing so.

Equifax and TransUnion are the two main credit bureaus in Canada. Each year, each business must provide a free credit report to anyone who requests one. They do, but they don’t exactly make things simple.

They advertise a subscription version of their websites that delivers frequent credit reporting for about $20 monthly. Equifax, however, demands that you print and complete a form that you get from their website before mailing or faxing it to the credit agency along with photocopies of your identity to obtain a free credit report.

You can only access your free TransUnion report online once a year. Fortunately, there is a superior method that is also cost-free.

Can I Refinance my Mortgage if My Credit is Bad?

With terrible credit, refinancing your mortgage is more complex, but it is still feasible. The type of refinance loan and the lender both have different credit requirements.  In some cases, people with credit scores in the 500s and 600s may be eligible to refinance their mortgages.

A credit score of 500 or less is sufficient to refinance an FHA loan. However, finding lenders who accept such low ratings is quite challenging. An FHA refinances usually requires a credit score of 580 or better. FHA cash-out refinancing calls for a better credit score, usually between 600 and 620.

How much time does the refinancing take?

Usually, it takes 30 to 45 days to complete a refinance. Nobody, however, can estimate how long yours will take for you. Third-party services such as appraisals, inspections, and other services can cause the process to be delayed.

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