For some people, mortgage renewal is a stressful process. For others, it barely registers as an inconvenience.
In most cases, stress only materializes when something disrupts the standard renewal process. This can happen if you reject your lender’s renewal offer and shop around for a better rate, or if your current lender decides not to renew your mortgage altogether. And yes, that can 100% happen.
In this article, we’ll explain:
- Why might your mortgage renewal get denied?
- How to make sure your mortgage gets renewed
- What to do if your mortgage renewal is denied
- Frequently asked questions
- Final remarks
Immovision
Need help with a mortgage renewal?
You don’t have to figure everything out on your own. If you’d rather skip the stress and get clear answers about your options, you can speak directly with a mortgage broker now. A good broker can quickly tell you what solutions may be available based on your situation.
Why might your mortgage renewal get denied?
When it comes time to renew your mortgage, you might be denied by either your existing lender or by a new lender, if you are looking to switch to get a better rate. In this section we look at why you might get rejected for a mortgage renewal in both cases.
1. Renewal denied by your existing lender
Your existing lender already knows you from when you first applied for your mortgage. This is why many lenders in Canada will offer to renew your mortgage automatically at the end of your current term. This is known as a “straight renewal”. Normally, they just want to see that you have been keeping up with your mortgage payments.
However, if you have missed, or made late mortgage payments, your lender may decide to look harder at your financial profile. In this case, your lender may reject your mortgage renewal if they no longer believe that you can afford the mortgage. This typically happens if:
- Your credit score has dropped
- You’ve missed, or made late mortgage payments
- You want to borrow more money
- You want to extend your amortization
- Interest rates increase well above your initial rate
- The lender has tightened its internal lending policies
What the lender really wants to determine is whether renewing your mortgage still makes financial sense for them. In other words, do they believe you’ll continue to make your payments and eventually repay the loan, or do they see too much risk?
ℹ️ Note
In general, lenders prefer to avoid foreclosure because it is expensive, time-consuming, and legally complex. If other solutions are available — such as refinancing with another lender, arranging a temporary extension, or giving the homeowner time to sell the property voluntarily — lenders will often prefer those options first.
2. Renewal denied by a new lender
Let’s say that you decide that you’d like to renew your mortgage application with a new lender. In this case, the lender does not know you and so will treat your renewal like a completely new mortgage application. This means that they will need to check:
- Your income and employment: pay stubs, T4s, tax returns, employment letters, or business income documents if you are self-employed.
- Your credit report and credit score: to assess your repayment history and overall borrowing profile.
- Your debt obligations: credit cards, car loans, lines of credit, and any other debts you currently have.
- Your debt service ratios: the lender will look at your debt service ratios to confirm whether your income can comfortably support your mortgage payments and other obligations.
- Your property’s value: in some cases, an updated home appraisal may be required.
- Your remaining mortgage balance and mortgage details: including amortization, payment history, and existing mortgage terms.
- The type of mortgage charge on property title: for example, whether it is a standard or collateral charge, which can affect the transfer process.
- The loan-to-value ratio (LTV): comparing your remaining mortgage balance against your home’s current value.
How to make sure your mortgage gets renewed
Lenders usually prefer renewing existing mortgages because it is easier and less expensive than finding new borrowers or dealing with defaults. However, they still need confidence that you can continue making your payments. If your financial situation has weakened, they may offer a higher rate, stricter terms, or decline your renewal altogether.
In this section we take a look at 5 things that you can do to make sure that your mortgage gets renewed.
1. Keep a high credit score
Your credit score changes over time as your financial activity changes. Making payments, opening or closing accounts, increasing debt levels, or applying for new credit can all affect your score.
While many declines can be improved relatively quickly, rebuilding a lower score still takes time. That’s why it’s helpful to check your credit regularly so you can spot changes early and take steps to improve your score before the point when it will affect an important financial decision, such as mortgage approval.
In Canada, the credit bureaus calculate credit scores. The two main credit bureaus are Equifax Canada and TransUnion Canada. Each bureau uses its own scoring models and will interpret information slightly differently. This means your score is different depending on which bureau calcualtes it. The table below shows how credit scores are generally categorized and interpreted.
| Classification | Credit Rating | TransUnion Range | Equifax Range |
|---|---|---|---|
| Subprime | Poor | 300 – 692 | 300 – 559 |
| Near-Prime | Fair | 693 – 742 | 560 – 659 |
| Prime | Good | 743 – 789 | 660 – 724 |
| Prime | Very Good | 790 – 832 | 725 – 759 |
| Super-Prime | Excellent | 833+ | 760+ |
To get access to the best rates at mortgage renewal you should aim for a credit score that gives you a credit rating of “excellent”, however it is enough to have a “good” credit score at your mortgage renewal. Lower than this, and your lender might want to dig a little deeper.
Immovision
Check Your Credit Score (For Free)
Check your credit score in minutes using LoansCanada.ca.
2. Don’t close accounts right before renewal
Lenders want to see that you have a good history of paying your debts on time. However, if you close long-standing credit accounts right before your mortgage renewal, it can cause your credit score to drop because it lowers the length of your credit history.
Therefore, you should avoid closing old credit card accounts, lines of credit, or other long-standing credit accounts right before your mortgage renewal.
3. Don’t make a lot of applications right before your renewal
There are two types of credit checks: soft checks and hard checks. A soft check is a basic review of your credit and does not affect your credit score.
A hard check, on the other hand, usually occurs when you apply for new credit, such as a car loan, mortgage, or credit card. This type of check can temporarily lower your credit score because it signals to credit bureaus that you may be taking on additional debt, which can indicate increased short-term financial risk.
4. Make extra mortgage payments
If you have extra money available, making additional payments toward your mortgage can be a smart financial move. This is especially true when the interest rate on your mortgage is higher than the return you expect to earn from other investments.
For example, imagine your mortgage interest rate is 5%, while the average return that you expect to make on other investments is around 4%. In that situation, paying down your mortgage faster may make more sense financially. That’s because every extra dollar you put toward your mortgage effectively saves you 5% in interest, which is more than the 4% you might earn through investing.
In simple terms, you want your money working where it provides the greatest benefit. If your mortgage is costing you more in interest than your investments are earning, reducing your mortgage debt can be the better choice. An added benefit of this is that paying down your mortgage faster can improve your financial position when it comes time to renew, since you will owe less overall, own more equity and can even lower your monthly payments. All of this will make you appear less risky to your lender.
⚠️ Warning
Most A lenders give you an option to make extra, principle only payments each year. However, there are normally limits on the total amount of extra payments that you can make in a one year period. If you go over this amount, then you might incur a financial penalty.
5. Monitor your debt to income ratios
Your debt-to-income ratios tell lenders how much of your monthly income goes toward debt payments, including housing costs. The lender wants to make sure that you are not spending more than you can afford each month on housing. There are two metrics that lenders look at to determine this:
- Gross Debt Service (GDS) Ratio: Your GDS ratio measures how much of your gross monthly income goes toward housing costs. This typically includes your mortgage payment, property taxes, heating costs, and in some cases condo fees. For example, let’s say that your total monthly housing costs are $2,000 and your gross monthly income is $6,000. In this case, your GDS ratio would be 33%. Typically, A lenders (banks and credit unions) want to see a GDS ratio of up to 35%–39%.
- Total Debt Service (TDS) Ratio: Your TDS ratio measures how much of your gross monthly income goes toward all debt payments combined. This includes housing costs plus other debts such as car loans, credit cards, student loans, or lines of credit. For example, let’s say that your total monthly debt payments are $2,500 and your gross monthly income is $6,000. In this case, your TDS ratio would be 42%. Typically, A lenders (banks and credit unions) want to see a TDS ratio of up to 42%–44%.
You can do the calculation of your GDS and TDS ratios yourself, to check that you are likely to be within your lenders threshold.
ℹ️ Note
Although many lenders will allow a GDS ratio as high as 39%, many financial experts recommend keeping housing costs closer to one-third of your income. This leaves more room for savings, investing, and unexpected expenses, helping you maintain greater long-term financial flexibility.
6. Monitor your monthly credit utilization ratio
Another important metric to monitor is your credit utilization ratio. This measures how much of your available credit you are using and helps lenders assess how dependent you are on borrowed money for everyday expenses.
For example, imagine you have one credit card with a $10,000 limit and no other debt. If you regularly use the full $10,000 available on that card, your credit utilization ratio would be 100%. To lenders, this can suggest that you rely heavily on credit to manage your monthly spending.
In general, lenders prefer to see a credit utilization ratio below 30%. So, if your credit card limit is $10,000, it is best to keep your balance under $3,000 whenever possible.
A lower credit utilization ratio shows lenders that you are using credit responsibly and are able to manage debt without relying too heavily on it.
What to do if your mortgage renewal is denied
If your mortgage renewal is denied that you have four options:
- Negotiate with your existing lender
- Look for an alternative lender
- Pay off your mortgage in full
- Consider insolvency options
In this section we go through each of these options in detail so that you can know what steps to take in each case.
1. Negotiate with your existing lender
The easiest solution is often to convince your current lender to reconsider their decision. Depending on your situation, there are a few ways to make the mortgage more manageable.
- Extend your amortization period: Most mortgages in Canada are amortized over 20–30 years. If you have already paid down part of your mortgage over several years, your lender may agree to reset or extend the amortization period. This can reduce your monthly payments and make the mortgage more affordable. The downside is that you will pay more interest over the life of the loan. However, if cash flow is tight, this may help you keep your home.
- Refinance with a co-signer: Adding a co-signer with strong income and credit may improve your chances of getting approved for a renewal or refinance.
- Ask for a short-term extension: If your renewal date is approaching quickly, your lender may agree to temporarily extend your mortgage. This can give you time to explore other solutions, such as selling the property or arranging financing with another lender. It helps if you can clearly explain your plan and timeline to the lender.
2. Look for an alternative lender
If your current lender will not renew your mortgage, you may still qualify with another type of lender. There are three broad lender types:
- A lenders
- B lenders
- Private lenders
A lenders are traditional lenders such as banks and credit unions that typically work with borrowers who have strong credit, stable income, and lower debt levels. Because these borrowers are considered lower risk, they usually offer the lowest interest rates. B lenders work with borrowers who may have bad credit or inconsistent income and therefore charge higher rates and fees. Meanwhile, private lenders mainly focus on the equity in your home rather than your credit or income and typically offer short-term mortgages with the highest rates and fees.
ℹ️ Note
The best way to explore your options is to speak with a mortgage broker. Most brokers work on commission, so they will usually review your situation first and let you know whether they believe financing is possible.
To find a good quality mortgage broker use Immovision Broker Finder tool.
3. Pay off your mortgage in full
If you cannot renew your mortgage, another option is to pay off the remaining balance. In many cases, this means selling the property.
Selling the home yourself is usually better than allowing the lender to begin foreclosure proceedings. Homes sold through foreclosure often sell for less, and lenders generally prefer to avoid the process if possible. Because of this, they may be willing to work with you while the property is listed for sale. If you need to sell quickly, you generally have three main options, each with different timelines, levels of certainty, and potential sale prices:
| Option | Typical Timeline | Likelihood of Selling Quickly | Expected Sale Price |
|---|---|---|---|
| Sell to a cash buyer | 7–14 days | Very high | Usually below market value |
| Hire a realtor focused on fast sales | 30–90+ days | Moderate to high | Can be at, or even above market value |
| Compare a cash offer with a realtor’s valuation | Depends on the option chosen | Helps you evaluate both speed and price | Allows you to balance convenience vs. value |
For a full discussion on how to sell your home fast, read Need to Sell Your House Fast in Montreal? 3 Best Ways to Close in 7–21 Days.
4. Consider Insolvency Options
If you are unable to keep up with your mortgage payments and have significant other debts, you may want to speak with a Licensed Insolvency Trustee about your options.
Depending on your situation, solutions such as a consumer proposal or bankruptcy may help you deal with unsecured debts and create a path toward financial recovery.
Frequently asked questions
In Quebec, lenders generally enforce their rights through a legal process known as hypothecary recourse. This can allow the lender to take possession of the property, force the property to be sold under judicial authority, or, in some cases, take ownership of the property in payment of the debt. These proceedings can ultimately result in you being required to leave the home.
A mortgage renewal happens when your current mortgage term ends and you sign a new term, usually with the remaining balance staying the same. In most cases, you are simply renewing the mortgage for another term with the same lender or switching lenders without changing the loan amount significantly.
A refinance means replacing your existing mortgage with a new mortgage that changes the terms of the loan in a more substantial way. For example, borrowing additional money against your home equity, resetting your amortization period, or adding a co-signer to your mortgage.
If you have time to improve your financial profile, there are several steps you can take to rebuild your credit, such as making payments on time, reducing debt, and correcting errors on your credit report.
If you need a mortgage sooner, you may still qualify with a B lender or private lender. These lenders are generally more flexible when it comes to bad credit, although they often charge higher interest rates and fees. In many cases, borrowers use these types of mortgages as a short-term solution while they work on improving their credit score.
Final remarks
If your lender happens to deny your mortgage renewal, this can be create a lot of stress. That said, there are solutions for everything, if you act soon enough. This is why it is very adviseable to stay ontop of your credit score.
You can check your credit score for free, using an independent platform like LoansCanada.ca.
It’s important to think through your options carefully. For example, you should consider whether taking on higher-cost, short-term debt will actually improve your financial situation, or whether it may create additional stress and lead to further financial strain down the line. Or, if you just want to be rid of the property, if selling it fast, will allow you to pay off your mortgage, or will it just result in bankruptcy later in the year.
Before making any decisions, we recommend that you speak with a mortgage broker, a real estate agent, or both, for support. You can find both mortgage brokers and real-estate agents using a .
Before making any decisions, it is a good idea to speak with a mortgage broker, a real estate agent, or both. They can help you understand your options and guide you through the next steps based on your situation. If you are based in Montreal, you can also use our Immovision Specialist Matching Platform matching platform to find qualified mortgage brokers and real estate agents in your area.
