What Happens If Your Mortgage Renewal Is Denied?
Renewing your mortgage is a key step in maintaining homeownership, but it’s not always guaranteed. While most private lenders aim to keep existing clients, there are situations where a renewal request may be denied. Factors like missed payments, reduced income, or changes in lending policies can impact the decision. If this happens, knowing the reasons and your options can make all the difference. In this blog, we’ll break down the common reasons for denial and guide you on what to do next to stay on track.
Common Reasons for Mortgage Renewal Denials in Canada
Mortgage renewals can be denied for several reasons. Knowing these reasons can help you avoid unexpected challenges and better prepare for a smooth renewal process.
Missed or Late Payments
One of the most common reasons a mortgage renewal can be denied is a history of missed or late payments. Lenders rely on your ability to make regular payments to ensure they’re repaid on time. If your payments have been inconsistent, your lender might view you as a higher-risk borrower, making them hesitant to approve the renewal.
Decreased Credit Score
As you know, your credit score is checked before approving your mortgage. If your score has dropped due to missed payments, high credit card debt, or other financial challenges, your lender may reconsider their renewal offer. It’s important to regularly check your credit score and address any issues before renewal time.
Increased Debt
If you’ve taken on new debt, such as credit card balances or personal loans, your lender may be concerned about your ability to manage multiple obligations. Lenders assess your debt-to-income ratio, and if it’s too high, they may deny your renewal application.
Changes in Employment or Income
Lenders look for stable income when deciding whether to approve a mortgage renewal. If you’ve recently lost your job, had a significant reduction in income, or transitioned to self-employment with inconsistent earnings, the lender may see you as a higher risk. It’s important to keep your lender updated with any major changes in your financial situation.
Property Value Issues
The value of your property is another crucial factor for renewal. If the market value of your home has significantly decreased due to changes in the local real estate market, the lender may be concerned about the collateral backing your alpha loan. This can be more common in areas experiencing a downturn in the housing market.
New Lending Policies
Mortgage lenders periodically adjust their lending criteria based on market conditions, government regulations, or changes in their own policies. If your lender has changed their internal policies or risk guidelines, you might not meet the new requirements, even if you were approved in the past.
What Actions Should Be Taken if Your Mortgage Renewal Is Refused?
Contact Your Mortgage Broker
Consider Refinancing
Explore Government Programs
Build Your Financial Profile
Conclusion
Alpha Mortgage House Corporation is a Mortgage Broker in Surrey, BC. We provide mortgages for Home Purchases, Project financing, Second mortgages, Commercial mortgages, Mortgages for first-time home buyers and more. Alpha Mortgage is a one-stop solution for all your mortgage needs. Our team works with top lenders to provide you with the best financial options.