What to Do If Your Mortgage Renewal Gets Denied
When your mortgage matures, it indicates the end of the current term of your loan. When your term is shorter than your amortization period, you have to go through the renewal process several times until you pay off the entire loan.
Before your term expires, your lender will send you a renewal offer. The offer includes a new term, and a new rate.
The renewal process is also an opportunity to find a new lender with more favourable rates and terms. When your mortgage is up for renewal, it can mean re-qualifying for your mortgage.
Let’s go through different scenarios to explain what you can do if your mortgage renewal is denied.
Why Your Current Lender May Deny Your Mortgage Renewal
One of the advantages of sticking to your current lender is that they typically don’t have to re-qualify you. However, your lender always has the ability to request details about your current financial situation before approving your renewal. The lender may verify that your debt to income ratios are still reasonable and that you still have the ability to make your payments. Though this practice is uncommon if your mortgage has been paid as agreed.
Why A New Lender May Deny Your Mortgage Renewal
If your current lender denies your renewal, you can look around for a new lender. You need to submit a new mortgage application and re-qualify for the mortgage.
Just as when you got your original mortgage, the lender will confirm income, credit, and mortgage repayment history. If any of these items do not fit their guidelines you may be denied by that lender.
What to Do When You Are Denied
If you are struggling to find a lender to renew your mortgage, you can look at alternative options with the help of a mortgage broker.
First, if your original lender was an “A” lender, then you can approach a “B” lender about your situation. “A” lenders are usually banks or credit unions, while “B” lenders are trust companies and equity lenders. “B” lenders are more likely to accept your mortgage renewal since they work with individuals with low credit scores and people with more debt than an “A” lender would handle. For this to be an option you will need at least 20% equity built up in your home. It is important to work with your mortgage broker to find the most suitable renewal.
-Jamie Arthurs