Can you be denied a mortgage renewal?

This is a question that we get all the time with the addition of the stress test over the last 5 years, many clients are wondering can their bank deny their mortgage renewal request now that they may not qualify anymore. The answer is that if you have made all of your payments as agreed, and not violated any of the terms of the mortgage which you were granted. Your bank is obligated to offer you a renewal.

What happens during a mortgage renewal?

The mortgage renewal process begins usually 6 months out from the maturity date. In Vancouver, your existing lending institution will likely send you a form letter in regards to your renewal with a variety of rates for you to choose from. You could elect to choose a rate, sign the form, and continue on with your new mortgage rate and payment come the maturity date. Unfortunately, the rates on these renewal notices can be up to 1% higher than what the bank could offer you and you could be missing out on thousands of dollars of interest savings by doing so. When you receive your renewal notice, you should engage your mortgage professional if you have not already heard from them. You should review the offer from your existing financial lender as well as the offers from other lenders and discuss your plans for that property and your lifestyle for the next term that you are electing to choose. This is your opportunity to make any changes to your mortgage that you see fit including accessing home equity, re-aligning your amortization with your monthly budgeting goals, and ensuring that the product will be a fit moving forward, so it is prudent to ensure you take the time to review all of your options.

You will either elect to remain with your existing lender for the convenience of a signature or you could choose to move to a new lender for a better product and rate. IF you choose to move, you will go through the full mortgage process of qualifying over again and having the title and mortgage registration adjusted.

What happens at the end of a mortgage term?

At the end of a mortgage term, your mortgage will come up for renewal. You can choose to either stay with your existing lender or move to a new one. The mortgage becomes fully open and all options are on the table.

Do you need a lawyer to renew your mortgage?

You do not need a lawyer to renew your mortgage. However, if you choose at renewal to move your mortgage from one lender to another or to access your home equity through a refinance, you will need either a notary, lawyer, or title company to help with the new registration on the title. If you are making no changes, there is no legal professional required.

What is the difference between renewing and refinancing a mortgage?

When we look to renew a mortgage, we are simply selecting a new term and continuing on with the paydown of the mortgage. Whether that is with the existing lender or a new lender. Anytime you are increasing the mortgage amount in order to access your home equity, it is considered a refinance and the rates available can differ between a straight renewal vs a refinance.

Will bad credit affect my mortgage renewal?

Credit is one of the five building blocks of a lending institution determining your credit worthiness. It definitely will impact your mortgage renewal as poor credit could limit your lending options at maturity. However, if you have no plans to move lenders and your poor credit has not been caused through missing mortgage payments, or other payments on credit items with the lender who carries your mortgage, you likely will have the ability to renew directly with your existing lender without issue. It should be noted that whether you have good credit or poor credit, there are lending options for all clients within the mortgage marketplace.

What happens if a mortgage is not renewed?

If you do not act on the renewal notice provided by your lender or choose to move your financing to another lender, your existing lending institution will Auto Renew your mortgage into a term set out by their policy. This could be a fully open term or a term that is convertible and would carry a penalty should you choose to move your financing to another lender. The rates in these open and convertible terms are usually quite high at 5-6% so it is important that you try to avoid this at all costs.

How do you negotiate a mortgage renewal?

Mortgage Renewals are best negotiated through your mortgage professional who has access to a wide array of products and lenders. They will quickly be able to provide you going rates for a product and term that you have indicated is a fit. It is important that you take the time to discuss your goals for the property and your lifestyle moving forward with your mortgage professional as these can play a very important role in determining the best lending solution moving forward. Remember, the rate is only a part of the negotiation and all of the terms should be considered as well.

How long does it take to renew a mortgage?

If you choose to stay with your existing lender, your mortgage can be renewed for the convenience of a signature. This whole process could take as little as 2 hours for you to sign and return the offer. However, if you would like to move your mortgage to another lender or access your home equity the process will take slightly longer and is largely dictated by your ability to provide your paperwork and sign your approval back in a timely fashion. We usually recommend that clients allow 3 weeks as a minimum from their maturity to allow for the planning and adequate approval and instruction time to the lawyers to ensure a smooth and seamless process.

How soon can you renew a mortgage

Mortgages come due based on the initial term that you selected. This could be 1-10 years and most lenders will allow you to renew that mortgage within 6 months of the maturity date. If you would like to move from your existing lender, you need to wait until your maturity date to pay out the mortgage or you would incur a penalty.  Some lenders will allow you to renew the mortgage early if you are extending the duration of your original term with them. This is called a blend and extend and sometimes is recommended for clients who are looking to hedge themselves in a rising rate market.