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Mortgage renewal denied

When it comes time to renew your mortgage for another term, you’ll need to make a decision about whether you’d like to stay with your current lender or make the switch to a new lender. Unfortunately, this decision isn’t always based on which lender can make you a better offer. For some homeowners, being denied for a mortgage renewal by one lender forces them to choose another. Let’s look at how being denied by either your current lender or a new lender will affect your options at mortgage renewal time.


Mortgage renewal denied by your current lender

As long as you’ve made all of your mortgage payments throughout your current mortgage term, there’s no reason to believe your current lender would deny your request for a mortgage renewal. In fact, while we encourage all homeowners to shop around at renewal time, one bonus of staying with your current lender is that they don’t need to re-qualify you in order to renew you. Knowing that, if you’re worried that a new lender would deny your application, signing the renewal notice your current lender sends you is one way to ensure your mortgage will be renewed.

With all of that being said, your current lender will assess your financial situation at renewal time, and see if you’ve racked up more debt than they believe you can afford to repay, or determine if your employment situation has changed for the worse. If anything about your finances concerns your current lender, they can choose not to renew you.

If you have lost your job or damaged your credit score, staying with your existing lender is often your best option at renewal time, because they don’t need to re-qualify you.


Mortgage renewal denied by a new lender

If your current lender denies your mortgage renewal, or if you just want to shop around for a better offer before you sign your renewal notice with them, you can try to renew your mortgage with a new lender. However, your chances of having your mortgage renewal denied by a new lender can be much higher than if you chose to stay with your current lender, for one simple reason: you need to submit a brand new mortgage application and meet the new lender’s borrowing criteria.

Since the new lender knows nothing about your financial situation, other than the balance of your current mortgage, they’ll need you to verify your income and meet their credit requirements. A volatile employment history, or a damaged credit score, along with any missed mortgage payments or other debt or loan repayments, can hurt your mortgage application with the new lender and easily lead to a denied application.


What to do if your mortgage renewal has been denied

If you find yourself in a situation where a lender has denied you for a mortgage renewal, there's a chain of order you'll have to follow:

  • If a new lender denies your mortgage application, you’ll have to hope that your current lender agrees to keep you on as a customer.
  • If new lenders and your current lender deny your renewal, you’ll have to talk to “B” lenders (trust companies and bad credit institutional lenders).
  • If your credit score is too low, you may be denied by a “B” lender, at which point you’ll need to decide if you want to Talk to a private lender, or consider selling your home.

It’s rare that a mortgage renewal would go through this chain of events and end up at the point where your house would need to be sold, but it can happen if your financial situation has taken a drastic turn for the worse. Remember that as long as you make your mortgage payments each month, you should at least have no trouble renewing your mortgage with your current lender.

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