When it’s time to renew the mortgage for the next term, you have the option to choose whether you want to stay with your present lender or want to switch to another lender. Unfortunately, you cannot make this decision on which the lender has a better offer. A lender can decline homeowners for renewing a mortgage and they are forced to choose another. Now, we will explain how your possibilities will be affected if your present or new lender decline you.
Mortgage Renewal Declined by Your Present Lender
If you have paid all your mortgage costs during your present mortgage term, your present lender has no reason to decline the request for renewing your mortgage. We always encourage homeowners to look around other lenders at renewal time, but one plus of keeping your present lender is they do not have to re-qualify you to renew you. With this in mind, if you worry another lender would decline your application, staying with your present lender and signing the renewal notice they send, will ensure the renewal of your mortgage.
Your present lender will evaluate your financial situation during the renewal process, and decide whether you have racked up more debt you have the funds for repaying, or see if your employment situation has worsened. If they are concerned about your finances, they have the right not to renew your mortgage.
If you damaged your credit score or lost your job, the best you can do is stay with your current lender at renewal time since they do not have to re-qualify you.
Mortgage Renewal Declined by Another Lender
In the case where your existing lender declines the mortgage renewal, or if you want to look around for a better offer before signing the renewal notice, you can try to renew it with a new lender. Just keep in mind that the chances of being declined by the new lender are higher than staying with your present lender. The main reason is that you need to apply for a brand new mortgage and meet their new borrowing criteria.
The new lender does not know your financial situation, except the balance of your present mortgage so you will need to confirm your income and fulfill all their credit conditions. A damaged credit score, unstable employ history, and missed mortgage payments can hurt the application and lead to a declined application.
What Are Your Options if the Mortgage Renewal Has Been Declined
If a lender declines your mortgage renewal, there are certain things you need to do:
- If new lenders decline your mortgage application, hope your present lender approves to keep you as a client.
- If both the present lender and new lenders decline the renewal, talk to “B” lenders (bad credit institutional lenders and trust companies).
- If you have a low credit score, a “B” lender can decline you as well, so your options here are going to a private lender, or sell your home.
It is rare to end up with the worst-case scenario – having to sell your home, but it is a possibility if your financial situation has drastically worsened. Remember – if you make the mortgage payments regularly, you will not have trouble to renew the mortgage with your present lender.