During the early days of the mortgage business, brokers would require a lot of paperwork…
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Once your current mortgage term reaches its end date, you will need to renew it for another term. This is the process you will have to go through several times before your mortgage is fully paid.
As a routine process, you will get an email from your lender about the renewal. This email will likely include the mortgage rate, length of the term, and a slip that you can sign and send back. The process might seem convenient, but involves a lot of complexities; one of which can be the denial of your mortgage.
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If you are a Canadian and your mortgage renewal is denied by RBC, CIBC, BMO, SCOTIA, TD, or any other lender, this guide is for you. We will see the possible reasons for the denial, your options to consider once your mortgage renewal is denied and what you can do to avoid this in the future. So, keep reading for the ultimate guide on mortgage renewal.
You are here, which possibly means, your mortgage renewal is denied. Thus, let’s talk about it first.
Why My Mortgage Renewal Was Denied?
There are two main reasons why your mortgage renewal can be denied, depending on which lender you are working with. Let’s discuss each.
Mortgage Denied by Current Lender
You may have wanted to stick to your lender as it does not ask you to re-qualify for tasks like determining debt service ratios. Typically, as long as you have made all your mortgage payments throughout your term, there is no chance your current lender will deny your mortgage renewal.
However, if you are under some financial stress like you have racked debt more than you can afford, your credit score has gone below average, or your employment situation has changed for the worse. In simple words, if there is anything that your lender might see untoward, your mortgage renewal can face difficulty.
So, next time you go for the mortgage renewal, make sure you recheck the above-mentioned points. You can also check our mortgage calculator to know the best time of renewal. It is important to mention here that, if you struggle to make your payments with your current interest rates, you can be at risk of having your mortgage renewal denied.
Renewal Denied by New Lender
If your current lender is denying your mortgage renewal, or if you just want better rates than the previous mortgage term, you may shop around for a better offer. The best of doing this is by looking for a new lender who can renew your mortgage with new rates. For this, you can contact a mortgage broker or a mortgage agent to help you find the best match for your needs.
However, know that getting mortgage renewal from a new lender is way more complex and difficult than from your previous lender. Your chances of mortgage renewal denied are higher with the new lender than the old lender. This is why you need to submit a brand new mortgage application with your renewal.
One glaring reason for this denial is that the new lender does not know anything about your financial situation. He can only know after looking at the renewal slip provided by your current lender. So, he will need to further verify your income and ensure you meet its specific credit requirements before it can approve your application.
If your past mortgage record is not good and your credit score is damaged too, then the possibility of your renewal being denied is high. In such a case, it is better to stay with your current lender as it will not ask you to requalify for it.
Once you know the possible reasons for your mortgage renewal denied, it is time to know your best possible options.
If you are rejected by both your current and your new lender, you need to consider the below options.
Denied by Current Lender
If you are denied by your current lender, here are your options from the best to the worst.
Consider a B lender
If your original mortgage was with A lender, a bank, or credit union in most cases, then it is time to find a B lender. B lenders are generally bad credit lenders or trust companies, that lend people with lower credit scores. You do not have to worry even if you are racked up with debt, as B lenders do not mind this. But know that, the interest rate will be higher since your financial situation is not good.
Talk to a private lender
If your credit score is below average, you can be denied by the B lender. If this is the case, you can talk to a private lender and ask for the mortgage renewal. However, before considering this, know that a private lender has higher mortgage rates on the market than the A type lenders. This can increase total your cost as the interest is high over time.
Sell Your Home
If you do not want to get a mortgage with higher interest rates, then your final option is to sell your home. This is the worst possible option but still an option to keep you afloat. Selling the house will require you to sell and move at short notice. If you are close to your mortgage renewal date, you may not have time to finish the sale before your term expires. In this situation, you might need to take out a short-term or an open mortgage from a B lender or private lender.
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The bottom line
Although it is very rare to reach the point where you will need to sell your home; it can happen if your financial situation is worse. This is the reason why it is important to make your monthly mortgage payments and maintain a good credit score. By doing so, you will not save any problem in renewing your mortgage.
If you are looking for expert guidance in getting your mortgage renewal, Lionsgate is at your service. Please contact us and we will send you a customized plan to see your needs and current financial condition Or visit our website for more details.