Going through the mortgage renewal process can be stressful for many Canadians. After all, it’s not every day you’re looking over mortgage terms and comparing rates from different lenders. After spending the time researching and preparing for your new mortgage, it’s no doubt disheartening when your mortgage renewal gets denied. While this is a setback, there are still options available! We’ll go through them in this article below, however nothing compares to meeting directly with a mortgage broker (like us!) or other professional to get advice for your exact situation.
Why was my mortgage renewal denied?
Lenders may deny a mortgage renewal for many reasons. Oftentimes it’s because your financial situation has changed since you first signed your mortgage with this lender, but sometimes even if nothing has changed for you financially, your mortgage may still be denied. Here are some of the most common reasons we’ve encountered for denied mortgage renewals.
Credit Score Decline
Missed mortgage payments or increased debt load may lower your credit score, giving lenders less faith in your ability to pay large sums of debt back in a timely manner.
Financial Instability
A reduction in your income or losing your job can make lenders reconsider your risk profile and tolerance. Similarly, if your credit score drops, having less income (or no income) can make lenders uncertain of whether you’ll be able to repay your loan.
High Debt-to-Income Ratio
Another red flag for your ability to repay your mortgage is if you are carrying too much debt relative to your income. Lenders look at this ratio to determine an approximation of how much of your income can go to repaying debts versus everyday living expenses. If your debt-to-income ratio is too high, there’s a higher likelihood your income will be going to the everyday essentials like groceries and gas, and less towards repaying loans like credit card debt, car payments, and your mortgage.
A Change in the Lender’s Policies
Even if you make your payments on time and have a decent credit score, your lender may have changed their criteria and thresholds since you initially signed your mortgage and you no longer fit their requirements.
What can I do if my mortgage renewal was denied?
If you find yourself with a denied mortgage renewal, there are many things you can do to help your current situation and plan for a better process the next time your mortgage is up for renewal. Here’s what we as mortgage brokers recommend.
Ask Your Current Lender for Reconsideration
First, if you would like to continue with your current lender, find out from them why your renewal was denied. There may be ways you can offer additional proof of your ability to continue paying your mortgage, or they may be able to offer flexibility if the reason for denial was due to financial hardship. Regardless of why your mortgage was denied, knowing the reason will help you plan for applying for mortgages with other lenders.
Refinance with a Different Lender
No two lenders are the same and each lender has different requirements and criteria for what mortgages they accept, and as we saw above these reasons can change over time! A mortgage broker like Auxilium Mortgage can help you find a new lender who may have more flexible requirements if you need them, or one that is generally better suited to your current financial situation. Mortgage brokers can also help you prepare your application to present you in the best light, often getting you better rates and terms than if you were to apply on your own.
Consider a B Lender or Private Mortgage
If traditional lenders won’t renew your mortgage, alternative lenders like B Lenders or private mortgage options can be a fantastic short-term solution while you work on improving your financial situation and credit score. Auxilium Mortgage specializes in working with homeowners with bad credit and tarnished financial situations, and our connections to B Lenders and private mortgage companies have helped many Vancouver Island residents find a mortgage when traditional options denied them.
Improve Your Financial Profile
While you won’t be able to increase your credit score dramatically overnight, working on your financial profile by reducing debt and increasing your income will help your application for future mortgages. One way to do this is a possible refinance with either a B or Private lender to pay off debt that is currently reporting on your credit bureau. With this debt no longer reporting on your credit bureau, over the next few months your credit score is likely to improve.
How can a mortgage broker help if my mortgage was denied?
At Auxilium Mortgage, we specialize in finding mortgage solutions when traditional lenders say no. We have a wide network of lenders across British Columbia to secure financing that fits your situation, whether you need additional flexibility on payment terms or have been denied for a less-than-stellar credit score or a high debt servicing ratio. No matter your situation, our expert team is here to hear your frustrations and work with you to get you the best mortgage possible.
A denied mortgage renewal doesn’t mean you’re out of options, and you’re not alone in your search for a mortgage. Reach out to us today for a no-obligations consultation and let us find a solution that works for you.
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