Second Mortgage Problems: What To Do When The Bank Won't Refinance

Reasons Why Your Application is Denied

Were you hoping to take out a second mortgage on your house but the bank denied your application? Not getting approved for an additional mortgage can be common amongst homeowners and can occur for multiple different reasons. One of the reasons is that your loan balance on your first mortgage could be too large. If you already have a large amount of mortgage debt, financial institutions will be more hesitant about approving you for an additional loan until your first mortgage is reduced.

Another reason your application could be denied is if you do not have enough equity in your home. You are able to borrow money with a second mortgage by tapping into your home equity, therefore, if you do not have enough equity, you will not be approved for a second mortgage.

Other reasons your application could be denied is if your credit score is too low, you have insufficient funds, or if you do not have any assets. Your mortgage lender wants to know that you are financially capable of taking on an additional mortgage and will be able to pay them back. Therefore, if your credit score and income are too low or if you have no assets, then you would be considered too risky to lend to.

What To Do Next

If your mortgage refinancing application has been denied, do not worry because there are a few things you can do.

1.Apply With A Different Lender
You do not have to stay with your original broker if you wish to refinance. Shop around and apply to different lenders to increase your chances of getting approved.

2. Re-apply With Your Current Lender
If you have been denied by a different lender, try applying one more time with your original lender. To prevent losing your business, your broker might be more willing to work with you if they knew you were trying to seek a second mortgage elsewhere.

3. Raise Your Credit Score
If you keep getting denied by different lenders, you might want to take a step back and increase your credit score. Start by paying off high-interest loans, and avoid making any large purchases. Once your credit score has improved, your Brampton mortgage broker may be more willing to approve you for a second mortgage.

7 Reasons the Bank May Reject Your Second Mortgage Application

Getting your mortgage application returned with the word “declined” stamped across the front is something homeowners wish to never see. However, having your application rejected for a second mortgage is not a rarity. To give you a better understanding and prevent this from happening in the future, our team at the Lotus Loans & Mortgages have listed 7 reasons the bank may reject your second mortgage application.

1. Recent Job Change

When applying for a Brampton second mortgage, your broker wants to know you have enough finances to pay off your loan. If you have recently switched jobs, your application will most likely be declined because lenders feel most comfortable if you have been with your current employer for at least two years. The longer you have been with your employer, the more financially stable you seem.

2. Owe Too Much

If you owe too much money on your first mortgage, you will most likely be declined for a second mortgage. Your local mortgage broker will not accept your application if you are in too much debt, therefore, pay off your existing loan more before you apply for a second mortgage.

3. Not Enough Equity

Second mortgages give you access to a lump sum of money by tapping into your home equity. If you do not have at least 20% of the equity in your home, your application may be declined.

4. Low Credit Score

Just as your credit score determined if you would get approved for a first mortgage, it also affects your eligibility for a second mortgage. If you have missed payments or applied for more credit, your score could be lowered, which may affect your chances of getting approved.

5. Low Income

If you do not have enough money in your savings due to a low income, your second mortgage application will most likely be rejected. Make sure you have saved up enough money or wait until a job promotion until you apply.

6. Recently Made A Large Purchase

If you have recently made a large purchase and are in more debt, your application could be affected. Hold off on buying a new car or making any other expensive purchases until after your second mortgage application is finalized.

7. Borrowing Limit

Your second mortgage application may also be declined if you are asking for too little or too large of an amount. Talk with your local Brampton mortgage broker ahead of time to know your borrowing limit.