What Happens If Your Mortgage Renewal is Denied in Canada?

In 2025, approximately 1.2 million Canadian mortgages are up for renewal. The large majority of these mortgages (85%) were contracted when the Bank of Canada policy interest rate was 1% or lower. Since this time, interest rates have gone up, and now many Canadians are worried about how they’ll afford their payments.

If you’re questioning whether a bank can deny your mortgage renewal in Canada or what happens if your mortgage renewal is denied, we have answers. Here’s everything you need to know about mortgage renewal denial and what you can do about it. 

Why Was Your Mortgage Renewal Denied?

If your mortgage renewal is denied, the first step is to understand why. You can do this by reaching out to your lender for clarification. Some possible reasons might include: 

• Change in financial circumstances. If you’ve lost your job or experienced a decrease in your income, your lender may deny your renewal if they’re concerned you can no longer afford your payments.  

• Missed mortgage payments. Missing multiple mortgage payments can result in renewal denial. It can also damage your credit, which can eventually lead to foreclosure.  

• High debt-to-income ratio. If you’ve taken on a lot of new debt, your debt-to-income (DTI) ratio might be too high. If you renew with your current lender, they don’t typically require a complete requalification and might not recalculate your DTI. However, if you apply with a new provider, they may deny you if you have too much debt. 

• Poor credit score. Typically when you want to borrow money from a lender, they’ll check your credit score. If your credit score has declined since you initially contracted your mortgage and is now classed as a poor credit score, this is associated with increased risk and may result in the denial of your application. 

Who Denied Your Mortgage Renewal?

How you deal with your mortgage renewal being denied also depends on who denied it. Was it your current lender or a new mortgage provider?

Current lender 

While your current lender typically won’t require a full requalification process, they’ll still check in on your financial situation. If they see that your financial situation has significantly declined (e.g. taking on more debt, losing your job, etc.) and worry that you’ll struggle to make your payments, they’re not obligated to renew your mortgage. 

If you’re happy to stay with your current provider, focus on paying off debt and improving your credit score to increase your chances of renewal. 

New lender 

If you’re looking for a better rate or mortgage terms, you might apply with a new lender. If your financial situation has gotten worse since the beginning of your mortgage term, switching lenders might be even harder than renewing with your current lender. 

With a new lender, you’ll have to go through the entire application process which includes rigorous financial approval. To increase your chances, closely monitor your credit score and take steps to improve it. Working with a mortgage lender can also help you find a lender to match your financial situation. 

Assess Your Financial Situation

If you have a mortgage renewal coming up in 2025, it’s a good idea to assess your financial situation. This way you know where you’re at and what you need to do to put yourself in a better financial position. Here are a few things you can do to get an overview of your finances:  

• Review your credit report: You can start by reviewing your credit report. If your credit score is lower than you expect, see if there are any issues or errors. If there are, you can dispute them with the credit bureaus. If the lender agrees there’s an error, the credit bureaus will update your report. 

• Calculate DTI:  If your debt load has increased in the last few years, you may want to calculate your debt-to-income ratio. Your DTI looks at how much of your total monthly income is going towards debt repayment. Mortgage lenders typically want to see a DTI less than 44% of your gross (before tax) income. You can calculate your DTI using the Government of Canada’s calculator. 

• Assess your budget. Take a look at your budget to see if it’s possible to make cuts to your discretionary spending. For instance, can you pause a few subscriptions or cut back on eating out? Then you can redirect this money to pay off debt. By paying down your existing credit card and loan balances, you can improve both your DTI ratio and your credit utilization ratio, which in turn helps to boost your credit score. 

Explore Alternative Mortgage Options 

Four months before your renewal, start comparing mortgage lenders to see what’s out there. If you don’t think you’ll get accepted with a traditional lender, you can look at alternative options. 

Traditional lenders, also called A lenders, include the big Canadian banks. These lenders tend to have more stringent criteria, making it harder to qualify for a mortgage. Banks regularly check credit for mortgage renewals, so if your score has dropped, you might have better luck with an alternative lender. 

Alternative lenders, known as B lenders, are typically more flexible and have more generous criteria. While it’s generally easier to get accepted with an alternative lender, they usually charge higher interest rates or additional fees.

If you can’t find a B lender, you can look into private lenders, but interest rates are even higher and often come with additional conditions or restrictions.

If you want help searching for an alternative or private lender, consider working with a mortgage broker. A broker can help match you with the right lender based on your financial situation. They can also help you negotiate rates. 

Improve Your Financial Profile

If you have some time before your renewal date, focus on boosting your financial profile. For instance, start taking steps to improve your credit score. Aim to pay your bills, including your mortgage, on time and in full. If you can’t pay the full amount, at least make your minimum payment. Your payment history accounts for the largest portion of your credit score. Even one late payment can negatively impact your credit score.

In addition to paying your bills on time, avoid taking on any new debt. Remember, new lenders will look at your DTI when assessing your application. You want to keep this number as low as possible. 

Consider a Co-Signer or Joint Applicant

A co-signer is someone who agrees to pay your mortgage if you can’t. For instance, a parent might agree to co-sign their child’s mortgage to help them get approved. The co-signer has no ownership rights over the property, they’re just there to cover the bill if you can’t. 

Adding a co-signer can increase your chances of getting approved because it reduces the lender's risk. If you don’t pay your bill, there’s someone else who will. Before going down this road, it’s important the co-signer understands what they’re getting into. If you can’t pay your mortgage, it falls on them. This can cause financial strain for the co-signer and could harm your relationship.  

A joint applicant is someone who takes on a mortgage with you. They have equal ownership rights on the property and share equal responsibility for paying the mortgage. For instance, your spouse or partner might act as your joint-applicant if you take out a mortgage together. 

Having a joint applicant can increase your chances of getting approved, especially if they have a high credit score and a solid income. 

Think About Other Options 

If you’re struggling to make your mortgage payments and can’t find a lender to accept your renewal, you may consider other options, such as downsizing, renting out all or a portion of your home to earn extra income, or, if no other options are available to you, selling your home. While it’s an emotional decision, downsizing to a more affordable home can put money back in your pocket. 

Having more funds available can help you pay your bills on time and eliminate debt. Over time, this can improve your credit score, decrease your DTI and put you in a better position to purchase the home of your dreams.   

Are You Ready to Renew Your Mortgage?

If your mortgage renewal is denied, this doesn’t necessarily mean the end of homeownership. But, you will have to assess your situation and look at different options. Start by understanding why you were denied, this will inform your next steps. If you want to renew with a new mortgage company, consider working with a broker who can help you find a lender that fits your financial profile. To increase your chances of getting approved, consider adding a co-signer or co-applicant. You can also take proactive steps to reduce debt and increase your credit score. The earlier you take action and start preparing for your renewal, the better.  

Check out our guide on how to renew your mortgage for tips on how to prepare.