What Happens If Your Mortgage Renewal is Denied in Canada?

When your mortgage term ends in Canada, you generally have the option to renew your mortgage with your current lender. The chances of being denied are very low if you stay with your current lender, as your renewal will not be subject to income verification and other details required by a new lender. However,  there are circumstances where a lender may deny your renewal request. Understanding the implications and steps you can take if this happens is crucial for maintaining your financial stability and keeping your home.

Reasons for Denial

Lenders may deny mortgage renewals for several reasons:

• Credit Issues

If your credit score has significantly dropped since you first got your mortgage, lenders may see you as a higher risk.

• Property Value

If the value of your property has decreased, it might affect your lender’s decision.

• Payment History

Late or missed mortgage payments can lead to renewal denial.

Immediate Steps to Take

If your mortgage renewal is denied, you need to act quickly to secure your financial position:

Contact Your Lender

First, try to understand why your renewal was denied. Discuss with your lender if there’s anything you can do to address the issues and potentially overturn the decision.

Explore Other Lenders

Start shopping around for other lenders who might be willing to take on your mortgage. Mortgage brokers can be particularly helpful as they have access to multiple lenders and can find one that suits your situation.

Improve Your Financial Profile

If your denial was due to credit issues or debt levels, take steps to improve your financial health:

• Pay down debt
• Correct any credit report errors
• Ensure all bills are paid on time

Options If You Can’t Secure a New Mortgage

Sell Your Home

If securing a new mortgage is not possible, you might need to consider selling your home. This can be a difficult decision, but it might be the best way to avoid foreclosure and protect your financial health. If you are looking for a quick sale, I can connect you with one of my investors who may consider purchasing your house.

Seek Alternative Financing

Consider alternative financing options such as private lenders or a second mortgage. These options usually come with higher interest rates, so weigh the pros and cons carefully.

Rent-to-Own Agreement

In some cases, a rent-to-own agreement can be arranged where you sell your home to an investor but stay on as a tenant with the option to repurchase the property later.

Legal Considerations

If you face foreclosure, it’s crucial to understand your rights. Consult with a real estate lawyer to explore all legal avenues and ensure you’re fully informed about the process and your options.

Preventing Future Issues

• Regular Financial Check-Ups: Regularly review your financial situation, including your credit score and debt levels, to ensure you remain an attractive candidate for mortgage renewal.
• Build an Emergency Fund: Having an emergency fund can provide a financial cushion and prevent issues from arising in the first place.
• Stay Informed: Keep abreast of changes in the mortgage market and understand how they might affect you. Knowledge is power when it comes to securing and renewing your mortgage.
• Working with a Real Estate Agent: A real estate agent can be an invaluable resource in securing your financial future. They have access to various lenders and can help you find a new mortgage if your renewal is denied. By working with a real estate agent, you can be promptly notified of any issues and take necessary action quickly.

Being denied a mortgage renewal can be a stressful experience, but with prompt action and informed decisions, you can navigate this challenge. Whether it’s improving your financial profile, seeking alternative lenders, or exploring other financing options, there are ways to secure your home and financial stability.