Yes, you can absolutely be declined for a mortgage renewal. While renewals are often automatic, lenders may refuse to renew if your financial situation has changed, such as a significantly lower credit score, missed mortgage payments, increased debt loads, or a drop in income. Lenders can deny renewals if you no longer meet their criteria.
Dramatic drop in house value, defaulted mortgage payments, decrease in income are all factors that could lead a bank not renewing a mortgage.
Credit scores are usually measured on a scale from 300 to 900, with higher numbers indicating a better credit history. Scores in the "fair" range (560-659) may still allow you to renew your mortgage, but anything below 600 can raise red flags for lenders.
If you haven't already, ask the lender why your application was declined. They might not give you answer, but it's worth a try. The next step is to look at your credit history, to see if you can spot anything that may have put the lender off. One way to do this is by checking your Experian Credit Report.
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.
We carry out an affordability check and provide advice. We'll do a credit search which will show on your credit file. If you change to an interest only mortgage, you'll need a suitable repayment plan in place to pay off the capital at the end of your term.
Reducing your mortgage balance means you can remortgage for a lower value, which could solve the reason you can't get a remortgage. Paying down short-term debts such as credit cards and overdrafts will also help if you can't get a remortgage due to affordability because of other debt repayment obligations.
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.
Why can't I remortgage my property?
The 30% rule is a common guideline that advises not to spend more than 30% of your gross monthly income on housing costs, which encompass your mortgage payment, property taxes, and homeowner's insurance. This rule can be a useful tool in assessing whether you can afford to purchase a home with a $60k salary.
If you stay with your current lender, you typically don't need to requalify or pass the mortgage stress test again — unless you're making major changes like increasing your loan amount or extending your amortization.
Increasing your monthly payments, making bi-weekly payments, and making extra principal payments can help accelerate mortgage payoff. Cutting expenses, increasing income, and using windfalls to make lump sum payments can help pay off the mortgage faster.
A household should allocate no more than 28% of their gross income to housing expenses. Total debt payments, including housing, should not exceed 36% of gross income under the 28/36 rule. Lenders often use the 28/36 rule to evaluate creditworthiness and loan approval.
Explore Other Lenders
Mortgage lenders have varying approval criteria. If your current lender declines your renewal, other lenders may be willing to take on your mortgage. Our experienced Mortgage Connection team can help you identify alternative options for your financial situation.
Most lenders will allow three missed payments before considering foreclosure. However, it's best to communicate with your lender if you're struggling to make payments. Many lenders may be willing to defer payments to help you regain control of your finances and avoid foreclosure.
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.