Yes, a bank can refuse a remortgage if you do not meet their current lending criteria, even if you have not missed previous payments. Common reasons for rejection include poor credit history (missed payments, CCJs), high debt-to-income ratios, insufficient equity, or strict age limits.
Common reasons for remortgage applications being declined
Typical reasons for being declined include: Having fallen behind with the repayments on your current deal. Poor credit rating. Your employment status is no longer favourable.
While banks are not required to renew your mortgage, they are more likely to do so if you have been a responsible borrower. However, if your financial situation has changed—such as an increase in your debt load, missed payments, or a drop in your credit score—the bank may decline to offer a renewal.
Homeowners can be disqualified from refinancing because they have a low credit score, not enough equity, or too much debt. If your DTI ratio is above your lender's maximum allowed percentage, you may not qualify to refinance your home.
Credit scoring is slightly different from affordability but can be a factor in why you can't get a remortgage because a low credit score or history of adverse credit issues will mean some lenders cannot offer a remortgage at all, and others will charge higher interest rates.
Why can't I remortgage my property?
Can you be denied a refinance? Absolutely, and it's more common than you might think. More than 4 in 10 (42%) refinance applications are rejected, typically for reasons like having too much debt, poor credit, insufficient home value or incomplete paperwork.
The main "2 rule" for refinancing is getting your interest rate at least 2 percentage points lower, but other key considerations include calculating your break-even point (how long to recoup closing costs) and your reason for refinancing (lower payments vs. shorter term). A significant rate drop (like 2%) usually makes refinancing worthwhile if you stay long enough, but even smaller drops can save you money over time, especially with high loan amounts or long stays.
Can you be rejected for a mortgage renewal? Yes, you can be rejected, but it's fairly uncommon. If you've missed payments, have a lot of debt, or your financial situation has considerably worsened, there is a chance the bank might decide not to renew your mortgage.
The final steps of a remortgage are pretty much the same as a buying a new property. Your new lender will carry out a credit check to confirm your current circumstances and arrange for your property to be valued. You'll need a solicitor or conveyancer to handle the transfer of your mortgage.
It's not always easy, but it's not impossible, either. Being your own boss and trying to remortgage simply means you need to be thorough when proving your income. Most lenders will want to see at least a year's worth of audited accounts, while others will ask for three years.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
Risky spending habits
But frequent and large transactions to betting shops or gambling sites can be a major red flag. It suggests risky spending habits, which may raise concerns on whether you'll prioritise mortgage repayments.
It's partly true: most negative items like late payments and collections are removed from your credit report after about seven years, but the underlying debt often still exists, and bankruptcies (Chapter 7) last 10 years, so your credit isn't entirely "clear" but mostly refreshed from old negatives. The 7-year clock starts from the date of the original delinquency, not when you paid it off or sent to collections, and the debt itself can still be pursued by collectors.
Inadequate or negative equity is probably the most common refinancing problem in the book. When lenders decide whether or not to offer you a loan, they factor your equity into their loan-to-value (LTV) ratio. Many lenders require an LTV of at least 80 percent before they'll approve you for a loan.
Understanding Mortgage Affordability in Canada
For insured mortgages in Canada, CMHC recommends a maximum GDS ratio of 39%. For a $90,000 salary (which breaks down to $7,500 per month), this means your housing costs shouldn't exceed $2,925 per month.
Mortgage Approvals & Debts
Your total debt load plays a crucial role in determining whether you qualify for a mortgage and how much you can borrow. A high level of debt can either reduce the amount a lender is willing to offer or lead to outright rejection.