Posted: 1 Aug '21

How Do Mortgage Renewals After Consumer Proposals Work?

How Do Mortgage Renewals After Consumer Proposals Work

If you are facing financial difficulties, you may be considering a consumer proposal to protect your assets and repay your debts, such as your mortgage. However, a consumer proposal leaves a mark on your credit report and affects your credit rating negatively. When your contracted mortgage period with your current lender ends, you may be wondering how to navigate mortgage renewals after consumer proposals. Call us today for more information.  

What’s A Consumer Proposal?

If you are struggling with crippling debt and don’t have enough income to manage payments and bills on time, you can file a consumer proposal. Under the consumer proposal, you negotiate your debts with your creditors and extend the period required to pay your debts. 

Once your Licensed Insolvency Trustee (LIT) files your consumer proposal, you are protected from your creditors. This means that they cannot pursue you until you reach a suitable agreement. With more time to pay your debts, you can alleviate some of your stress and focus on paying your creditors. 

It’s important to note that a consumer proposal does not affect your assets and secured debts. This means that it is filed to unsecured creditors such as bank overdrafts, credit cards, payday loans, and any other unsecured lines of credit. If you are having trouble paying secured debts such as mortgages and auto loans, you should speak to your lender to negotiate new payment terms.

Does a Consumer Proposal Ruin Your Credit Rating?

A consumer proposal lowers your credit score. When you sign a consumer proposal, you legally and officially declare that you cannot afford to pay back your debts and need assistance. As such, your credit takes a hit. Your credit score may already be suffering, especially if you’re behind on multiple debts. However, you can redeem your credit status after filing the consumer proposal. In any case, filing a consumer proposal and getting an R7 (normally, it would be R1) rating is better than making no effort to settle your debts (would be an R9). 

Will You Lose Your Home When You File a Consumer Proposal? 

Fortunately, no. This is one of the main advantages of filing a consumer proposal instead of bankruptcy. You may be able to keep your home and the equity you have accumulated in it over the years of payment. In the consumer proposal, you work with your LIT to negotiate with creditors and reach a payment plan to clear your debts. The LIT organizes for your debt payment to match the equity in your home. 

Also, as long as you pay your mortgage payments, a lender cannot foreclose your home for filing a consumer proposal. The only way a lender will attempt foreclosure is if you have missed payments. Keep making payments and seek a mortgage renewal after a consumer proposal when your contracted period is over. 

Can You Renew Your Mortgage After a Consumer Proposal?

Even if you get to keep your home after filing a consumer proposal, the time comes when you have to renew the mortgage. Generally, if you have made all payments on time, you should have an easy time finding a mortgage renewal after a consumer proposal. You can often get a mortgage renewal after consumer proposal with your current lender.

Unfortunately, you may find it challenging to find new lenders who will approve you. Consumer proposals and unsettled debt damage your credit score, making it hard for traditional lenders to approve your requests for a mortgage renewal after a consumer proposal. More so, even if you find a mortgage renewals after a consumer proposal, the rates aren’t favourable. Remember that the consumer proposal lasts for three years on your report after its completion, meaning that accessing mortgage renewals after consumer proposals within this period is difficult. 

Accessing Mortgage Renewals After Consumer Proposals

Dominion Lending Centres mortgage brokers work with you, even when you have bad credit, to help you secure a mortgage renewals after a consumer proposal. Contact us today in Edmonton for assistance. 

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