Ontario Subprime Mortgages
Although the term subprime mortgage was made infamous by the US housing collapse, a subprime mortgage is still a valuable asset to responsible Ontario home owners. A subprime mortgage is a mortgage that falls just outside of CMHC insured lender guidelines. These lenders assist borrowers who are not bad off enough for a private mortgage but will not qualify through a traditional lender.
What makes a Canadian subprime mortgage that much different from the US? During the height of the US housing market, subprime lenders were offering over 100% on the value of a home with little or no income verification. The lenders also offered ‘teaser rates’. These are rates that would start out being very low but balloon into a much higher rate. Canadian subprime mortgage lenders will offer between 85%-90% loan to value, have a much more responsible approach to the lending and do not involve ‘introductary rates’.
Here is a comparison between a traditional lender, a subprime lender and a private lender:
| Lender | Minimum LTV |
Maximum TDS |
Minimum Bankruptcy Discharge |
| Traditional | 95% | 44% | Minimum 24 months |
| Subprime | 90% | 50% | Minimum 3 to 12 months |
| Private | 85% | N/A | N/A |
LTV – Loan To Value ratio. The amount being borrowed versus the value of the property. A $190,000 mortgage on a $200,000 property would produce a 95% LTV ratio.
TDS – Total Debt to Service ratio. The amount of debt being serviced as a percent compared to the total income.
For more information on subprime mortgage lenders or to see if you will qualify for a subprime mortgage call today or apply online.