5 Things that Determine the Cost of a Bad Credit Second Mortgage in Toronto

If you have a bad credit score, getting any loan can be a huge challenge. Even if you get it, the cost of the mortgage is pretty steep. In order to get a good deal, you have to understand the various components that determine the cost of a bad credit second mortgage in Toronto. Fair Choice Mortgages Toronto, is one of the leading licensed mortgage brokers in Toronto and according to their experts, you have to consider the following 5 factors to determine the cost of your mortgage.

Interest Rate

A second mortgage is offered at varied rates and your credit score determines the amount of interest that you have to pay. When you are looking for a Toronto bad credit second mortgage, you have to consider the amount of interest rate charged. Since the second mortgage is subordinate as opposed to the first mortgage, the interest rates are higher as well. The rate can vary from 6.85% all the way up to 13%. The higher the interest rate, the higher will be your monthly re-payment installment.

Credit Score

Your credit score is a huge determinant of the cost of your second chance mortgage Toronto. Your FICO score or credit score is divided into multiple ranges. When your score is below 620, you’d be considered to have a bad credit score. The amount of mortgage and the willingness to lend at a reasonable interest rate will be determined by the lender on multiple factors and your credit score is among the top few.

Employment History

When giving any kind of a loan, the lending institution looks at the ability of the borrower to pay back. With your employment history and current income the lender will be able to determine your ability to pay back and hence the potential of the risk. Your employment history and current job status play an important role in determining the cost of the mortgage to you.

Term Length

The tenure of the bad credit second mortgage Toronto will have a direct impact on your monthly installments. If you decide to pay off the loan in a shorter amount of time which means that you have a shorter tenure, the amount you will pay on a monthly basis will be higher. But the interest you will pay on the entire mortgage will be lower. However when you have a longer tenure for repayment the monthly installments will be lower but the overall interest amount paid will be higher.

Closing costs

With most of the second mortgages in Toronto, the closing costs are lower than the first mortgage costs. The costs may vary from lender to lender, some may also ask for some processing fees.  You have to shop around a bit to learn about the closings costs that prevail in the market and accordingly finalize the lending company. The amount you pay as closing costs ultimately increases the amount that you are paying to acquire the loan.

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