For many, qualifying for a mortgage is stressful. But getting your mortgage renewed can also be stressful. Just because you have a mortgage doesn’t mean your renewal is 100% guaranteed. There are a number of reasons why your mortgage renewal could be denied, either by your current lender or a new lender. Below you’ll find some reasons why your mortgage renewal might get denied and what you can do if it does happen.
Why Your Mortgage Renewal Might Get Declined
The most common amortization period for a mortgage in Canada is 25 years and the most popular term is a five-year fixed mortgage. When your current mortgage term ends, you’ll need to renew the outstanding balance on your mortgage for another term. If the amortization period is 25 years, you can look forward to going through the mortgage renewal process at least five times.
Several months before the mortgage renewal term matures, you’ll receive a letter from your lender telling you that your contract is up for renewal. You’d think renewing a mortgage with your current lender would be a simple process, but this isn’t always the case.
Situation #1: You Are Denied by Your Current Lender
You do not generally need to requalify for a mortgage if you decide to stay with your current lender. That said, if you’ve missed monthly payments, your mortgage renewal request could be rejected. Worse yet, you could go into default and risk foreclosure.
Even if you’ve never missed a mortgage payment, your renewal could get rejected. The banks will review your financial situation, which means looking at your credit report and credit score.
Why? Traditional lenders want to make sure you haven’t racked up a large amount of debt that you may not be able to repay. This tells them that there is a high probability you could file for bankruptcy.
They’ll also want to see if your employment situation has changed. If you’ve lost your job, your income has been reduced, or you’ve found a new job with a smaller income, they could deny your mortgage renewal. In fact, any financial warning signs could result in your mortgage renewal being denied by your current lender.
Situation #2: You Are Denied by a New Lender
It’s not uncommon for homeowners to look for a new lender when their mortgage term comes up for renewal. Some switch because they want to find a better mortgage rate. Others are forced to look for a new lender because their current lender denied their renewal.
If you’re switching lenders because your original lender rejected your renewal, you’ll soon discover that there are some hoops you need to jump through. And just like your original lender, a new lender could deny your mortgage renewal as well.
When you switch lenders, you need to go through the mortgage qualifying process all over again. This means submitting a new application, which will trigger a whole new look at your finances, credit, and background information. Only after this review will they decide if you meet their standards.
If you’ve taken on a large amount of debt, missed mortgage payments, or your financial situation has changed for the worse, your mortgagee will be rejected.
If you are approved, you’ll be hit with a number of new fees, including the appraisal of the property, a fee to end your mortgage with your current lender, a fee for your new contract, and legal costs.
It’s entirely possible that your mortgage renewal is rejected by your current lender and you do not have enough saved up to cover the costs associated with switching to another traditional lender.
Things You Should Do if Your Mortgage Renewal Is Declined
Traditional lenders, like Canada’s big banks and credit unions, are federally regulated. This means they have to adhere to a strict lending and renewal process. If your credit score is low or your financial situation has gotten worse, chances are good they’ll reject your mortgage renewal.
Or, if they do agree to renew your mortgage, it will not be with the same rates and terms you initially signed on for. They will penalize you with higher rates and terms that are less than appealing.
If this is the case, your best chance for getting a mortgage renewed is to talk to a mortgage professional who works with alterative lenders. A growing number of Canadian homeowners have discovered the benefits of working with a private mortgage lender.
Private mortgage lenders, because they are independent, do not need to follow the same strict, federally regulated rules that traditional lenders do. With private lenders, you get access to the same kind of services that traditional lenders offer, but their qualifications are much more realistic.
Canadalend.com, Helping Your Business Secure a Better Mortgage
The mortgage renewal process can be stressful, even in a best-case scenario. If your mortgage renewal has been rejected because your credit score has fallen, you’ve taken on unmanageable debt, or your financial situation has changed for the worse, speak with the mortgage renewal experts at Canadalend.com.
The licensed mortgage experts at Canadalend.com are independent, that means they’re looking out for your best interest, not the lenders. Because the mortgage professionals at Canadalend.com are independent, they have access to hundreds of different lenders.
Many of the alternative lenders that Canadalend.com deals with specialize in providing mortgages, mortgage renewals, and loans to individuals and businesses that have declared bankruptcy, have bad credit, no credit, and unreliable income.
If you need help going through the mortgage renewal process and want to see what your financial options are, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.
In October 2017, the Federal Government announced that a mortgage stress test would be applied to all mortgage applications in Canada. This news caused a firestorm of opinion and questions as many believed that it would block tens of thousands from homeownership.