Renewing your mortgage is a significant financial milestone, allowing you to reassess your financial goals and potentially secure a better rate. However, sometimes things don’t go as planned, and you may find yourself being denied your mortgage renewal. While it can be disheartening and stressful, this setback does not mean that all hope is lost. There are steps you can take to address the situation and work towards securing the financing you need to keep your home.
Understanding the Reason for a Denied Mortgage Renewal
Lenders will typically provide a detailed explanation of why your mortgage renewal was denied; whether related to credit history, income, debt-to-income ratio, or other factors. Common reasons for denial may include a decrease in credit score, changes in employment or income, increased debt, or a reassessment of the property’s value. By understanding the specific reasons behind the denial, you can better address them and take appropriate action.
1. Review Your Finances
Take a closer look at your financial situation, including your income, expenses, savings, and debts. If there have been recent changes in your income or employment, work on stabilizing these aspects. Are there any areas where you can make improvements? Are there outstanding debts that you can pay down to improve your debt-to-income ratio? Reviewing your finances can help you identify areas for improvement and demonstrate to lenders that you are a responsible borrower.
2. Review & Improve Your Credit Score
Start by reaching out to a reputable credit bureau (such as Equifax or TransUnion) to obtain a copy of your credit report. Review your report and check for any inaccuracies or discrepancies that might have contributed to the denial. If you identify any errors, promptly dispute them with the credit bureau to fix your credit score.
It’s worth noting that a low credit score is a common factor in mortgage renewal denials. To increase your chances of approval, focus on taking steps to improve your credit score (such as paying bills on time and avoiding new debt.)
It may take some time to see significant improvements, but even small increases in your credit score can positively impact your eligibility for a mortgage renewal.
3. Explore Alternative Lenders
While your current lender may have denied your renewal, it’s worthwhile to explore other lenders in the market; as different institutions may have varying criteria. You may find a lender more willing to work with your current financial situation.
If traditional lenders have denied your mortgage renewal, consider exploring alternative lending options. Non-traditional lenders, such as credit unions and private lenders, may be more inclined to work with borrowers with less-than-perfect credit or complicated financial histories.
Although alternative lenders have different eligibility requirements and higher interest rates, they can provide a lifeline for homeowners facing denial from traditional lenders.
4. Use a Mortgage Broker
If you’re unsure about your next steps or need guidance on improving your financial situation, consider seeking advice from a licensed mortgage broker. These professionals have access to a wide network of lenders and can assist you in finding a suitable option tailored to your unique circumstances.
By reviewing your finances, offering personalized advice, negotiating with lenders on your behalf, and ultimately working to enhance your chances of securing a mortgage renewal, a licensed mortgage broker can be a valuable resource in navigating your mortgage renewal.
5. Consider Refinancing or Selling
If all else fails, consider exploring options such as refinancing your mortgage with a different lender or selling your home. Refinancing with a new lender may potentially offer more favourable terms and/or lower interest rates, allowing you to secure the financing you need. On the other hand, selling your home and downsizing or opting for a rental arrangement may offer financial relief and help you avoid foreclosure.
6. Stay Positive and Persistent
Dealing with a mortgage renewal denial can be disheartening and stressful, but staying positive and persistent is essential. Remember that setbacks are a normal part of the homeownership journey, and there are always options available to help you navigate these difficult situations. By staying proactive and determined, you can overcome obstacles and secure the financing you need to keep your home.
Facing a mortgage renewal denial can be a challenging experience, but it’s not the end of the road. By understanding the reasons behind the denial and taking proactive steps to address them, you can increase your chances of securing a successful mortgage renewal in the future. Whether through improving your credit score, stabilizing your finances, or exploring alternative lenders, there are various paths to explore.
