One of the most important details in your mortgage agreement is the term. Once the term on your mortgage is up, you’ll either need to renew your contract or look for another lender. But what happens if your bank decides not to renew your mortgage?
In this blog, we’ll look at what happens if you can’t renew your mortgage in Canada, from options for alternative financing to selling your home and everything in between. Let’s get started.
How Does Mortgage Renewal Work?
While it may sound simple on paper, the mortgage renewal process is more intricate than you may think – even if your financial situation hasn’t changed since you first bought your house. Right now, shifting economic factors are impacting both homeowners and lenders in a big way, and as a result, nothing is guaranteed.
Here’s how mortgage renewal works: Your bank or lender will reach out to you directly in the weeks or months leading up to the end of your mortgage term. If you are eligible, they will offer you a renewal statement, allowing you to extend your mortgage with updated conditions (such as your interest rate, payment frequency, and terms) in place. If you’re comfortable with the agreement, renewing your mortgage could be as simple as signing on the dotted line.
That said, you don’t have to renew your mortgage either. As a homeowner, you have the right to shop around for a better deal and consider moving your financing to another lender. However, be aware that moving your mortgage can entail certain financial drawbacks.
Considering a home sale? Find out how to maximize your ROI with these blog posts.
- Is It a Good Time to Sell My House?
- How to Find the Best Oakville Real Estate Agent to Sell Your Home
Can a Bank Not Renew Your Mortgage?
As the term on your mortgage expires, your bank or lender may choose to preemptively deny your renewal. If this happens, you’ll need to pay off the remaining balance of your loan by a specific deadline. After that, you can either search for a new mortgage contract (from a new provider) or explore alternative options, like selling your home.
Under Canadian law, your lender must provide you with written notice a minimum of 21 days before the end of your term if they do not intend to renew your mortgage.
Why Was My Mortgage Renewal Denied?
Being denies a mortgage renewal can happen for a variety of reasons; however, the motivations are typically financial. For example, if you’re suddenly unemployed or making less money than you were when you first bought your house, the bank may see that as a liability. Similarly, if you’ve been late with previous mortgage payments or have recently taken on new debts, your lender may no longer be comfortable working with you.
In some cases, a lender may decide not to renew based on outside factors completely unrelated to the homeowner, such as economic or market changes. Either way, the sooner you take action, the better.
What Happens if Your Mortgage Renewal is Denied?
Finding out that you’re ineligible for a mortgage renewal can be a scary feeling. However, it’s not always a worst-case scenario, and the more proactive you are, the more options you’ll have to solve the situation.
First, reach out to your bank or lender directly to ask why your mortgage renewal was denied. They may propose actions or changes that you can make to become eligible for renewal, such as asking for an extension, improving your credit score, or lengthening your amortization.
Should You Sell Your Home?
If you’re struggling to keep up with your mortgage payments or have been denied a renewal, selling your home in exchange for something more affordable is an option worth serious consideration. Unlike extending amortization, this route won’t cost you more in interest, and it can help you avoid similar circumstances the next time your mortgage term is up.
Selling your home gives you a chance to reset financially. Once you’ve accomplished a great return and paid off your mortgage (along with any other relevant debts), you’ll have a clearer picture of your overall financial health. From there, you can build a fresh, well-thought-out budget for your next home purchase. Alternatively, you can choose to rent for the time being if it suits your goals.
Want to know more about the home selling process? You’ll want to read these blogs next!
Falling Behind on Your Mortgage? I Can Help!
Thinking about selling your home in Oakville, Ontario? You’ll want to partner with an experienced agent who specializes in the local market – like me! For more than 30 years, I’ve helped homeowners sell for top dollar, and I can do the same for you.
I have the unique insights and expertise to help you maximize your returns, ensuring you have as much money left over as possible after paying off your mortgage. Once we’ve accomplished a great sale, I can help you find a new place that matches your lifestyle and budget.
Ready to sell? I can help! To get in touch, call 905-464-7653 or email me at stacey@staceyrobinson.com.
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