Mortgage Renewal Denial Situations & Impact
As home buyers, you should look for mortgages that guarantee the right to renewal as long as you consistently making the payments. If you have made all mortgage payments on time, your lender won’t usually have any reason to deny your request for a mortgage renewal. When you stay with same lender, you might be paying higher interest but you will get convenience of easy renewing as they don’t need to re-qualify you in order to renew you. If you think new lenders will deny your application, it is recommended to sign the renewal notice received from current lender to make sure your mortgage is renewed. The new mortgage is based on the amount that you owe at the end of prior term. For instance, if you have paid $400,000 note down to $380,000 after the first five years, then your new mortgage for $380,000. Your equity acquired from the first year of payment will be maintained.
Mortgage renewal denial by current lender
It is prudent to know that even your current lender usually assess your financial position at the time of the renewal of mortgage to know about your credit health. If your current lender is not satisfied with anything about your financial concerns, they may choose not to renew your mortgage. If you have poor credit, then it is in your best interest to stay with your current lender as you won’t need to qualify for debt again with the current lender.
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. As the new lender doesn’t know about your financial situation, he will verify your income and other financial aspects to know if it meets their credit requirements. If there is poor credit score, missed mortgage payment or other loan repayments, such factors that can leads to denial of mortgage renewal by new mortgage lender.
Mortgage denial cases
- If your new lender denies your application, you will have to hope to be accepted by current lender.
- If both current and new lenders deny your renewals, you need to talk to trust companies and bad credit institutional lenders for a new mortgage.
- If your mortgage is denied by trust companies and bad credit institutional lenders as well, you will have to decide to either approach a private lender or sell your home to pay your debts.
It rarely happens that your mortgage will be denied by all and you need to follow the above mentioned chain of order, but exceptions are always there. If your financial position has taken a drastic turn, you may have to sell your home as well. Keep in mind, if your mortgage payments are regular on each month, you won’t have any trouble in renewing your mortgage with your current lender or even in getting best offers from new lenders.