The reason why some people struggle when trying to own a home is because they do not fully understand how the mortgage world operates. Well, it’s not a must that you grasp everything, but things like when to think about your mortgage renewal, types of mortgages available for you and how to lower your interest rates can help you get out of your mortgage debt faster and safer.
Let’s dig into mortgage renewal and what that means in Canada.
What is mortgage renewal?
A mortgage renewal is basically, a new agreement between the lender and the homeowner stipulating the regulations and terms in the next mortgage term.
In Canada, a mortgage term can be shrunk to as little as 6 months or as long as 4 years. So if the mortgage is not renewed after the term expires, the mortgage holder can request full payment of the money you owe them. In other words, a mortgage renewal is inevitable if you don’t have the cash to offset the full loan on your property.
Real Life Example:
Company X financed Mr. Antony White to acquire his home. The starting agreement was that he should be paying approximately $1010 every month as the loan repayment amount based upon a 25 year amortization period, in 4-year terms. After the elapse of every 4 years, company X (or a different lender) will need to renew Tom’s mortgage.
Can a Mortgage Renewal be Denied?
If the homeowner or borrower to be specific has consistently been paying their monthly payment, then there is no reason why the existing mortgage lender can refuse to renew the mortgage. However, if your repayment history is tainted with gaps and lack of commitment to your lender, you risk being dropped by your current lender – which in rare cases might expose you to further denials by other lenders in the market as well.
Although not common, your existing lender might also have their personal reasons to deny a mortgage renewal, maybe their business is stretched too much or something worse is happening to the company. In such a case, if you’ve been regular in paying your mortgage, a new lender will be waiting to renew your mortgage.
What if both your existing lender and new lender deny renewing your mortgage?
Such situations rarely occur, but they do. The solution to that is you talk to a new lender if your current lender doesn’t want to renew the agreement. However, if no traditional mortgage lender wants to strike a deal with you, because you have messed up your credit score, you can seek help from “B” lenders (bad credit institutional lenders and trust companies).
Now, should “B” lenders deny you as well, you can decide to run to private mortgage lenders.