Yes, your mortgage renewal can be denied; however, as a homeowner, you may not want to sell your house because you were denied a mortgage renewal option. Financial institutions can refuse you for various reasons, and it is critical to be prepared for this scenario. If you have been denied a mortgage renewal from your current mortgage lender, there are solutions available to you that do not require selling your house.
When you are denied a mortgage renewal, it is probably because you missed your monthly payments, you have a poor credit score, or it is because you have significantly higher debt. Your mortgage renewal can also be declined for reasons unknown to you. Well, this is the reason you are here, to get more information about mortgage denials.
When you visit a reputable mortgage broker, they can help you get your mortgage renewed speedily. Continue reading for additional information on how to renew even if your lender has denied you.
What to do if you have been denied a mortgage renewal
Keep in mind that you are not alone if your mortgage renewal application was denied. People frequently struggle to pay their debts on time due to health challenges, job loss, divorce, and other challenging life circumstances. As a result mortgage renewal requests get denied more frequently than you may have thought.
So, if you have been turned down for a mortgage renewal, contact a mortgage broker. Mortgage brokers deal with many traditional lenders and alternative lenders and are more likely to locate a lender willing to renew your mortgage, even if your previous lender will not.
A mortgage broker may also examine interest rates and mortgage options, and negotiate a mortgage for you from another traditional lender, or from alternative “B” or private lenders to discover the best mortgage for you and your financial position.
Another option for a denied mortgage renewal is selling your house and downsizing to a more affordable home with a lower mortgage. While selling your house is not always the best option or most desired option, in many cases it might help alleviate financial stress for you and your family.
Does credit score affect mortgage renewal?
A drastic decrease in your credit score can negatively affect your chances of qualifying for a mortgage renewal from your existing lender.
In many cases, a mortgage refinance, rather than a mortgage renewal, can be an excellent way to reduce your home's monthly mortgage payment. After several years of home ownership, the renewal process allows you to refinance your mortgage and borrow money on your home for the amount you owe at potentially lower interest rates. You can also pay a lump sum into your mortgage at renewal time without a penalty in order to lower your remaining mortgage balance. As a result, your monthly payment may be reduced, resulting in extra savings for you. However, if you have poor credit and try to renew your mortgage, you may encounter difficulties. Learn how to manage a bad credit score while renewing your mortgage to reduce your monthly mortgage payment.
If you have bad credit at the time of your mortgage renewal, you may have trouble pulling through. However, if you have made your monthly mortgage payments on-time payments and want to renew with the same lender, they may perceive that you are responsible and accept your mortgage renewal. If not, you may need to look into other alternatives for renewal, such as a private mortgage.
If you discover that a bad credit score is likely to impact your mortgage renewal cycle, it is essential to take time off to improve your score. You may have to consider debt consolidation to reduce your monthly debt and rebuild your credit score. Make sure you put in the work to improve your credit until credit has been fixed, and then check if you can renew your mortgage.
What happens if your mortgage renewal is denied?
“A” lenders such as large banks, monoline lenders, and credit unions, may refuse to renew your mortgage if you show symptoms of financial difficulty. If the bank refuses to renew your mortgage, you might always try a different A-lender who may have more flexible qualifying criteria.
However, if your position is bad, your chances of acceptance with a different A-lender may be just as low. Rather than risking the likelihood of being turned down by another A lender, your best choice is to work with a professional mortgage brokerage. An experienced mortgage brokerage specializing in alternative and private loans for homeowners whose bank has refused to renew their mortgage may be able to help you out of your challenging situation.
Your chances of qualifying improve dramatically if you have access to a wide range of Alternative lenders, B-lenders, and private mortgage lenders. A professional mortgage brokerage can arrange all of the same products that your bank can, including home equity loans, home equity lines of credit, plus other mortgage loans that banks do not typically arrange such as second mortgages. In many instances, this is possible with rates and terms comparable to those of an A-rated lender. A good mortgage brokerage does provide additional flexibility if you have bad credit or income problems. Working with an expert mortgage broker is always the best option to help ensure that you receive the best choices available to you. A mortgage broker can assist you in locating lenders with reasonable conditions and present you with your best options.
Does a mortgage renewal require a credit check?
Credit checks are typically performed before a mortgage renewal is approved; however, there are certain exceptions.
Remember that your credit score is always available to your creditors, and they may check it at any moment. In our experience as a mortgage brokerage, some clients are concerned because their credit score has declined, or they have amassed too much debt since signing their first mortgage agreement. Our advice is to constantly keep an eye on your credit score and credit history to determine where you stand at all times. If your credit report is in disarray and you have delayed examining your credit report until the renewal period, you may face a higher interest rate upon renewal or be denied renewal altogether.
From our experience, for the most part “A” lending institutions send a renewal letter to you and life moves on. This happens around 80% of the time and almost 100% of the time if you have consistently paid your mortgage payments on schedule. In this case, the lender typically looks at your payment history and thinks that you are a solid client to renew. They will most likely not even look at the credit report. Nonetheless, it only takes two or three late payments for the account manager to check and retrieve your credit score. If you are concerned about not renewing, the best course of action is to check your credit score and do what is needed to improve it in time for your renewal, or to prepare an alternative mortgage option in the event that your current lender decides not to renew your mortgage.
Credit scores can be acquired for free in Canada without needing you to input your credit card information to obtain it.
On the other hand, renewal time is typically a fantastic opportunity to shop around for the best prices if you follow basic practices. By not renewing with your existing lender, you might wind up saving thousands of dollars.
It is suggested that you begin researching current mortgage rates and speak with a mortgage broker 6-8 months before your current mortgage term expires. If you want to switch lenders, you will definitely be subjected to a credit check, just as you were when you initially looked for a mortgage. Lenders will look at your present financial situation, credit score, and other factors to determine what rates they can give you.
Are credit checks done with mortgage renewal?
The simple answer is yes, however, this is may not be the case if you maintain your monthly mortgage payments on time. In that case you might be present with a mortgage renewal document to review and sign. Two essential things to remember are to make the regularly scheduled payments on-time, and to keep an eye on your credit score.
Can you be denied a mortgage refinance?
Refinancing a mortgage can be an excellent method to reduce your monthly payments and save money on interest while repaying your home loan. Alternatively, refinancing your mortgage can also allow you to tap into your home equity should you need extra money for home renovations, debt consolidations, your retirement, purchase an investment home or second home, or for a number of other reasons.
It is important to remember however, that just because you own a house, that does not ensure that you will be approved by a lender to refinance your existing loan. You may be refused the chance to refinance for various reasons. If your refinancing application is denied, there are a few steps that you should consider taking.
Increase your credit score
To qualify for a new mortgage, you must demonstrate to a lender that you are a reliable borrower. However, if your credit score is low, you will not convey that picture. If you have been rejected for a mortgage because of credit issues, it is a good idea to focus on improving your credit. There are several methods to do it.
First and foremost, make sure that at least incoming bills are paid on time. Your payment history is one of the single most significant elements in determining your credit score, and being late on even one payment account may cause your score to drop.
Ensure all existing debts are Paid Off
Another factor that refinancing lenders consider is your debt-to-income ratio, which indicates how much debt you have in comparison to your income. A lender may refuse to give you money if your debt-to-income ratio is too high, fearing that you are overextended. If that is the case, start working on paying off some of your current debt. If you pay off specific credit card bills, you may be able to decrease your debt-to-income ratio while also boosting your credit score.
Increase your income
If your refinancing application was rejected, your lender might not feel that you earn enough money to service the debt. If this is the case, your best option may be to improve your income by taking on additional work, picking up more shifts at your current job, or starting a side business.
You could think that just because you own a property, that automatically qualifies you to refinance your mortgage. However, this is not always the case. If your credit is bad, your debt-to-income ratio is high, and your income is insufficient, you may be rejected when applying for a refinancing or renewal, even if you have always kept up with your current mortgage payments.
In conclusion, Interest rates are unlikely to remain at multi-decade lows forever. That is why, whether you want to refinance and lower your mortgage payment or you are ready to buy a new house, taking action now is critical.
If you were denied for your mortgage renewal, then it is probably because you may have been going about it the wrong way. An experienced and knowledgeable mortgage broker at Clover Mortgage can help you with your mortgage renewal or mortgage refinance approval.