Your mortgage is set in terms, with it being a year, two years or whatever you have agreed to. Renewing your mortgage is necessary when if and when your term is expiring and you still haven’t paid off the principal. But what happens if you don’t?
There are actually a few reasons why you may not renew your mortgage with your lender. Let’s take a closer look at why this could possibly happen.
A mortgage is generally not renewed when either party declines a renewal.
They first example we have is if you are the party that does not wish to continue with your lender. When it comes time to renew your mortgage, your lender will send you a document with the following important information:
- The length of term
- The principal remaining
- Your interest rate
- Your payment frequency
- Any fees or charges that may be applicable
Your lender may even include a renewal contract. All of this information should be sent out BEFORE your mortgage term expires. This is usually 21 days or more in advance. So if you don’t receive anything at least 21 days prior to the expiration date, make sure you contact your mortgage lender.
If you are happy with their services and would like to renew the mortgage term, you can sign the included contract and send it in – it’s simple and easy. However, you may not want to continue with this lender.
Financial situations are fickle and subject to change. If your financial circumstances have changed since signing, you may want to switch lenders to refinance your mortgage. If you lost a job, want to sell your home, or buy out a partner in a mortgage, these are all factors that could influence your renewal.
In order to find one that suits your current circumstances, we suggest taking a look closely at the contract terms before signing. Feel free to shop around and compare terms with other competitors just to make sure you are making the right decision.
The more research and information you gain, the more leverage you have to negotiate. If you don’t renew your mortgage, you could be owing a ton of interest and even risk your house being foreclosed on.
On the other hand, your lender could be the one denying renewal. In general, your lender should be happy to renew your mortgage if you are in good standing. Regular payments, a steady income and a good credit score are all things the lender considers.
If you remain an outstanding client, your lender could even decide to renew the contract automatically. They could also decline your mortgage renewal based on the aforementioned criteria as well. If they do decide not to, then they are required to notify you at least 21 days prior.
It’s safer to do your due diligence and contact the lender a few months beforehand just to get a picture of how you are doing. They could even tell you then if they have made a decision about renewal.
Any sort of changes you may encounter in your life that may affect you making timely payments, you should also be proactive and let your lender know about them.
If your mortgage is not renewed by the lender, then you would need to look for another lender (and quickly) to avoid foreclosure .
A saving grace for those denied not only mortgage renewal, but maybe also first, second and third mortgages, is private mortgage lenders.
These are usually companies, but there are individuals as well and their main purpose is to invest in these higher risk loans. Since they have less access to cash than a bank does, you can expect high interest rates with these options.
However, the term with private lenders are shorter, it can be as short as one or two years. A private mortgage lender can also be a temporary solution and pave the way to getting in the good graces of banks again.
In 1-2 years time (or however long your agreed upon term is), you can put yourself back together and rectify any errors that caused you to be declined a renewal in the first place. After your term is up, you can look to sign a new term with your bank again.
If you are having a really rough time, there are some private mortgage lenders out there that allow for interest only payments. This gives you more freedom and flexibility with your money in a desperate time.
One of the best things you can do to prevent yourself from being caught off-guard is to be proactive and get in touch with your lender first to determine if you qualify for a renewal. You can then get a jump start if you need to find a new lender.
For one thing, you need to make sure you aren’t late in renewing your mortgage. Lots of factors are subject to change. This could include your financial picture. You may have gotten a promotion or lost your job, these issues can affect the renewal.
Maybe the interest rates have changed, and you need to ponder whether it is in your best interest to renew or not. If you know your term is almost up, doing research may also give you better options.
Getting a head start will give you a better hand to play when the time comes to renew your mortgage.
Renewing your mortgage in time is paramount if you don’t want to lose your home. Communication is key with your lender. If there are any sudden issues that arise, clear communication could result in them being more lenient.
If you determine that your current lender isn’t for you or if you have been declined, look into private lenders to help you while you get back on your feet.