Bank Won’t Renew

Bank won’t renew your mortgage?

Don’t fret, you’re not alone.  Every year the banks seem to refuse more and more clients the option to renew their mortgage.  While it can put a tremendous amount of strain on you as a borrower the one thing you should do is address the problem immediately because once the mortgage reaches maturity the bank is going to demand repayment in full.  Without the option of renewal with your current bank you will have to find an alternative lender to assist you with your mortgage financing.

Options:

While options are certainly fewer when faced with a dilemma of this nature you still have options.  Most banks refusal to renew a mortgage is generally related to a poor repayment history.  While this is not always the case it is a common theme.  It will often be difficult to just switch banks, as most banks don’t want to take on another banks problem or what they perceive to be a problem.  Many banks will want to see your previous repayment history and in some cases ask for a mortgage rating which represents a problem if this is the reason your current bank won’t renew you.

None of this may seem too promising but there are lenders in Canada that don’t place all of their credence on repayment history or for that matter credit.  Some lenders still underwrite their mortgage with the spirit of “common sense” and factor in other conditions such as job stability and equity position.  The problem for most borrowers is know who these lenders are so working with an experienced broker is key to navigating the complex renewal process when your bank won’t renew your mortgage.

What steps should I take if my bank won’t renew?

While there is no specific formula or format to follow a good plan of attack is:

• Address the problem immediately.  Waiting will only delay the inevitable as a bank will never change their mind once they have refused to renew your mortgage
• Contact a mortgage broker with experience in these situations
• Be truthful. There is no point in trying to deceive the person trying to help you.  The reason you aren’t being renewed will surface at some point so get it on the table right away
• Be open minded.  If your mortgage isn’t going to be renewed your mortgage broker will likely have to seek out alternative mortgage lenders that may offer moderately higher rates.
• Be prepared to “weather the storm”.  If your mortgage broker is able to find you a solution at a moderately higher rate just keep in mind you can take it for a short term and focus on eliminating the issue that prompted the bank not to renew.
• Take action.  Once your broker has found a solution and paid out your old mortgage work on finding a way to prevent this from happening again.  If you were denied a renewal because of missed payments, build a savings account up.  If it was credit related work on repairing your credit.
• Be prepared to sell.  As sad as this sounds there are rare situations where not even the most educated broker will be able to assist you and if the situation necessitates it is always better to sell your home on your own volition rather than the bank forcing you out.

While the whole process can be a stressful one, you can ease the anguish by working with a mortgage broker that understands the ins and outs of your bank not renewing your mortgage.  Don’t put the situation off, be upfront and open-minded and you will find that a good mortgage broker can make the process seamless.