Thinking about what to do if your mortgage renewal has been declined? Your mortgage is the foundation of your home. Mortgages in Canada are normally boasted of as a way to achieve security, stability, and prosperity. However, securing and retaining a mortgage is never a guarantee.
One in ten Canadians struggles to make their mortgage payments, leading to being turned away on their mortgage maturity date. When your current mortgage provider notifies you that they are not renewing you, act quickly to find a new lender.
When a mortgage renewal is declined, your initial reaction may naturally be stress-related. However, there don’t panic there are still options available to you. We’ve put together some helpful information to help you take action if your mortgage renewal has been declined.
1. Understand Why Your Mortgage Renewal Has Been Declined
All mortgage providers must provide proper reasoning for why they have declined your mortgage. In Canada, it is common for mortgages to come up for renewal every five years or so. This means that, if you have a standard 25-year mortgage, there will be five fixed-terms within that mortgage period.
The mortgage provider will notify you months in advance of the maturity date to tell you that the mortgage is coming due. If you receive a renewal offer the process is fairly simple. No need to complete a new mortgage application. Just check to see what new terms and conditions there might be and decide whether or not you agree with them.
However, your existing provider may think twice about continuing their mortgage contract with you if they have concerns about your ability to pay. Additionally, you should already be looking for a new mortgage lender to see what type of options are available to you.
If your next provider rejects your application for a mortgage renewal, you are at risk of having no mortgage provider at all. Before you can take the steps to get a new mortgage, get a better idea of why your current mortgage is not being renewed by the lender.
Knowing what went wrong in the past goes into getting a new or better mortgage in the future. Whether you’re with a bank, credit union or private lender they will willingly let you know the reasons for declining the renewal.
Circumstances Affecting Your Mortgage Renewal
The most common reasons that a mortgage renewal will be declined are:
Missed Mortgage Payments
This is probably the most common reason a mortgage renewal will be declined in Canada. One or two delayed mortgage payments are usually easy to recover from, provided that you make the payment in full within a certain timeframe.
In fact, if you miss multiple mortgage payments, your existing mortgage lender likely can flag you as high-risk and decline to renew your mortgage. It is essential that you make your mortgage payments on time to stop this from happening.
Poor Credit Score
Your credit score is an indicator of how financially responsible and stable you are. If your credit score drops substantially before your mortgage renewal, your lender will definitely take notice. They will inquire into the reasons for bad credit and, if they have sufficient grounds for concern, will refuse to renew your mortgage.
Change in Income
Those on a fixed income can often have their mortgage renewal declined by their existing lender if that fixed income changes. Obviously, if you suffer a substantial decrease in income, your provider will be concerned that you are unable to actually pay your mortgage.
While you can often negotiate a mortgage payment holiday this should only be used in the event of an emergency. Lenders want to see that you can afford to pay for the mortgage you’ve signed up for.
Increase in Debt
If your credit score has dropped or if you have taken on more debt your current lender may decline to renew your mortgage. Mainly because you’ve taken on more financial obligations than you once had.
2. Switching Lenders Fast
Nevertheless, if your current lender is declined to renew your mortgage it is important to act fast. If you do not find a new lender, your home could potentially go into foreclosure. You should immediately begin your search for a lender that will take up your mortgage and allow you to renew with them. There are a number of key factors to look out for when finding a new lender, such as:
First and foremost, make sure that your lender will be able to accommodate your needs. If your previous lender declined your mortgage renewal because of your credit score, you will need to find a bad credit mortgage lender. It is important, to be honest about your personal situation and find a mortgage provider that is compatible with it.
A mortgage provider will offer you the best rates possible based on what you qualify for. This means that the rates of interest will be based on your income, credit score and repayment history.
Check that the fixed-term mortgage offered by a new provider is in the right time frame for you. Make sure that the payment term and frequency of the payments are reasonable and manageable.
Finally, you should make sure to find a lender that offers the flexibility that you need. For example, try finding a lender that offers payment flexibility and good repayment terms. Aligning yourself with a lender that has a multitude of options means you can always adjust things like payments.
Get a New Mortgage Loan Today
If your mortgage renewal has been declined by your existing lender, it is time to find a new provider that you can trust. Fortunately, you have come to the right place for expert help(mortgage broker). To find out more about how to qualify for a mortgage and the interest rates available to you today, make sure to get in touch with our friendly and knowledgeable team. Even if you plan to stay with your current lender a second opinion never hurts.