Mortgage brokers in Toronto are usually more flexible with these loans because your home is placed as collateral giving them a valuable asset to lay claim to in case you default on repayment. You can also get attractive rates on a second mortgage.
That having been said, your credit score does play a role in determining how easily you can get a second mortgage in Toronto and how strict the mortgage terms are. It tells the lender whether you are a high-risk or low-risk borrower. Any lender in Toronto will be willing to offer low rates to a low-risk borrower and will hesitate to do so if the borrower has a poor credit score. If you are looking to get a second mortgage, here are some ideas on how to improve your credit score in advance so that you get the best possible rates.
Avoid too many requests
Repeated requests for your credit score by many different lenders may actually cause your score to drop. Your credit can be affected when you ask a potential creditor to make inquiries about your credit as this implies that you are planning to get a new line of credit. Avoid making applications for loans that you may never avail of. Even if you don’t need to pay interest on a loan until you sign up for it, too many loan applications may still prove costly by damaging your score and hiking the interest rate you qualify for in the future.
Avoid taking new credit cards to boost available credit
Your credit score calculation takes into account the ratio of debt to available credit. To boost the available credit and consequently improve the debt to credit ratio, many people opt to take new credit cards or lines of credit. There may be some marginal benefits of this new credit, but the costs associated with such credit will negate any benefits. Another pitfall is that you may actually start using the credit and consequently increase your debt.
Fix errors immediately
Homeowners in Toronto should verify the accuracy of their credit scores well in advance before applying for second mortgages. If you find any anomalies or errors ask the rating agency to fix them immediately. This will allow you to present accurate information about your credit worthiness when you apply for the mortgage.
Rectify missed payments quickly
If you have missed a payment on any debt, make sure you make payment as soon as you spot the lapse. Generally, once an account is due for more than 60 days it will start appearing on your credit report. Tracking payments due regularly and fixing missed payments within this time window is the easiest way to make sure your credit score remains high.
Maintaining a good credit helps you negotiate better terms and get attractive offers from lenders when you shop for second mortgages. When you have a good credit score, you can also avoid paying higher interest on other loans and have better control over your finances.