There are several strategies that you can focus on when your mortgage renewal application is denied. You can consult with the brokers at sHelto who can provide more information about how to get your mortgage renewed.
Lenders can review multiple factors during the renewal process, such as credit score, income levels, payment schedules, and mortgage terms. These can be critical for internal review processes, along with your debt service ratios and overall credit worthiness.
It is important to note that you may have to go through multiple renewal processes as several people focus on multiple mortgage term based renewal through the amortization period. That’s why consulting with a mortgage broker can be helpful during the renewal process, whether you’re focusing on an existing lender or a new one.
Understanding core reasons why your renewal may be denied
You can start by understanding some of the common reasons why your mortgage renewal application may be denied. You can also focus on these factors to start improving your overall borrower profile.
Low credit score
A poor credit score can be an important factor for lenders to consider when it comes to mortgage renewals. Whether that be a private lender or a bank, your credit score will be an important parameter to determine creditworthiness and whether you will be able to make payments for your mortgage.
Lower income
Your current lender may deny your request for renewal if your employment status has changed or your income has lowered since when you had first applied for the mortgage. Mortgage brokers can help with understanding your unique situation, so that they can ensure that you’re ready for the application process when talking to a mortgage lender.
High debt
Your debt to income ratio is also an important factor when it comes to mortgage renewals. You can have a higher debt built up over the mortgage term, which can be above the threshold levels for the lender. You can also have higher debt that may lead to lower credit worthiness over time.
Mortgage stress test
The mortgage stress test is an important tool during the renewal process to ensure that the interest rates work for you and you’re able to make the payments as per the structure. Your mortgage stress test will be one of the most important factors in understanding whether you’re an eligible borrower for a renewal.
Missed mortgage payments
If you’ve missed mortgage payments in the past then your lender may be less likely to provide renewal for your applications. You may have to opt for alternative lenders or B lenders who can provide financing to you and help you get the right mortgage terms.
Follow these strategies if your renewal was denied
It is important to know what happens if your mortgage renewal is denied, which is why you can reach out to our experts to learn more. You can also focus on improving your credit score and enhancing your overall income to get renewal expedited for your case.
Consulting with a broker
A broker can help you connect with B lenders and private lenders who can provide financing for your mortgage. They may be able to provide renewal options when your traditional banks or lenders may have denied your application.
Extend amortization period
You can work with your existing lender and extend your amortization period to get a better monthly mortgage payment structure. You can effectively lower your payments but may take longer to pay off the complete mortgage, depending on your financial situation.
Improve credit score
You can improve your credit score by making the monthly payments on time. This can positively affect the mortgage renewal application process by showing high credit worthiness. You can also order a credit report and fix any issues present in it to show a good credit score.
Co-signer
You can bring a co-signer who can help when your denied mortgage renewal process isn’t allowing you to get a renewal approved. If the guarantor has a positive credit score and is able to sign-on, then you may be at a more favourable position when asking for a mortgage renewal.
Lower debt
You can lower your overall debt obligations to show better debt to income ratios when you’re applying for a renewal. You can also focus on making monthly payments for your debts in a timely manner, so that you’re able to improve your credit worthiness.
Are you at a higher risk of being denied by a new lender or an existing one?
You are a higher risk of being rejected by a new lender, if your credit score and income levels aren’t as per the internal parameters during reviewing.
Unknown financial criteria
In some cases, some new lenders may consider your mortgage renewal riskier as they may not have a clear idea of your ability to make monthly mortgage payments. You may have to consult with a mortgage broker to understand whether there is a risk of mortgage renewal denied for your application.
New review process
There will be a new review process that will require new documentation, waiting periods, and protocols to follow when applying. You will also have to ensure that you’re able to clear the internal debt service ratios, and other parameters when you are applying for a renewal process. The interest rates may also not be favourable depending on your existing parameters.
Different internal factors
A new lender may have different lending factors that may not allow for seamless mortgage renewal for your current mortgage scenario. You may experience new sets of challenges, as each lender will have their own threshold for how much they’re willing to lend based off your credit score, income, etc.