Mortgage Blog

What Happens If Your Mortgage Renewal Is Denied

May 15, 2024 | Posted by: Tuli Parubets

What Happens If Your Mortgage Renewal Is Denied

Your mortgage renewal is an integral part of your home ownership journey. It allows you to stick with your current lender or find a new one with a different rate. But what happens if your mortgage renewal is denied? A recent survey found that in 2024, nearly 1 in 5 homeowners will be at risk of having their mortgage renewal denied for various reasons. 

This post is designed to empower you by exploring the various reasons why your mortgage renewal could be denied. It also provides guidance on what you can do should you face this decision, putting you back in control of your financial situation. Remember, you have the power to explore options and take control of your financial future.

Why Would My Mortgage Renewal Be Denied?

Just because you have a mortgage, it doesn't mean that you're automatically guaranteed to get a mortgage renewal, and just like applying for your mortgage initially, there are multiple reasons why your mortgage renewal might be denied. Understanding these reasons is crucial to making informed decisions about your financial future.

  1. You've Missed Payments

One of the most common reasons a lender refuses a mortgage renewal is that you have multiple missed payments, and your mortgage is in arrears. Your lender is under no obligation to accept a mortgage renewal, and if you aren't keeping up with payments, you could be facing a refusal.

  1. Bad Credit Score

Your credit score is a numerical representation of your creditworthiness, and it plays a significant role in whether or not your lender will accept your mortgage renewal. If you have a poor credit score, it may not work in your favor; however, your lender might overlook a less-than-desirable score if you haven't missed any payments. Get help repairing your credit today with Tuli Mortgage’s Credit Improvement Services

  1. Reduced Income

If your income has changed since your mortgage was approved and isn't as high as it was, this could be a factor in your renewal being denied.

  1. You Fail The Stress Test

The stress test, a financial assessment mandated in Canada, evaluates your ability to manage potential increases in interest rates. You must pass this test to ensure your mortgage renewal application is approved.

  1. Too High A Debt to Income Ratio

Your lender needs to be confident that you can afford your mortgage, bills, and debts and still have enough for your daily living expenses. Your debt-to-income ratio, which compares your monthly debt payments to your gross monthly income, is a key factor in your mortgage renewal approval. Use a debt service calculator to get a snapshot of your current standings.

What Happens If Your Mortgage Renewal Is Denied

If you need to know what happens if your mortgage renewal is denied, these are your options.

  1. Use A Broker

A mortgage broker is a professional who can help you navigate the complex mortgage market. They have access to a wide range of lending options and can find tailored loans that suit your specific needs, increasing your chances of securing a mortgage renewal. Contact me today to discuss the options available to you and create a plan together.

  1. Talk To Your Current Lender

If your application is denied by your current lender, you can ask them why it was denied and what you can do to improve your chances of success.

  1. Improve Your Credit Score

Improving your credit score can significantly boost your chances of getting a preferable mortgage renewal. This means paying your debts and bills on time, avoiding missing payments, and not taking on new bad debt or large loans, such as car purchases or high-interest credit cards. Call Tuli Mortgage today for a free consultation in credit repair.

  1. Consider A Private Lender

A private lender is an individual or company that provides loans, often with different criteria and terms than traditional lenders. While they can be an alternative option, it's important to note that they may not be regulated, so it's crucial to understand the risks and benefits before considering this route.

  1. Consider Refinancing

If you're unable to secure a mortgage renewal, one option to consider is refinancing with a new lender.  This involves paying off your existing mortgage with a new one, often with more favorable terms and lower interest rates. It can also provide you with additional financing if needed. For more information, check out Tuli Mortgage’s mortgage refinancing services.

  1. Sell Or Downsize

If you're struggling with your mortgage repayments, think about selling up and downsizing or renting for a while until you're in a better position. This is not always suitable for everyone or possible, but it's a last resort option to consider if your mortgage renewal is denied.

  1. Get A CoSigner

Having a cosigner with a good credit score can boost your chances of accepting your mortgage renewal. If your guarantor has good credit, your application can be bolstered.

  1. Consider A Different Lender

If traditional lenders are denying your application, you might consider approaching B lenders. These include credit unions, monoline lenders, and trust companies. While they may have different criteria and require you to pass a stress test, exploring these options could lead to a successful mortgage renewal.

Moving Forward

What happens if your mortgage renewal is denied is something many homeowners worry about. Even if your renewal has been denied, there are other avenues to explore. Don't hesitate to reach out to Tuli Mortgage for guidance and support in navigating this situation. Contact us today to explore your options and find a solution that works for you.

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