Posted: 1 Feb

Mortgage Renewals After Consumer Proposals May be Less Daunting than You Think

Mortgage Renewals After Consumer Proposals May be Less Daunting than You Think

Clients struggling with debt often seek consumer proposals to pay creditors and spread debt payment over some time. More importantly, you can secure your assets, including the equity in your home. As long as you keep making timely mortgage payments to your lender, you can keep your home. Call us today to learn more about mortgage renewals after consumer proposals.

After filing for a consumer proposal, the main question on any prospective homeowner’s mind is, “Do I qualify for a mortgage renewal after a consumer proposal?” The answer is yes. You qualify for mortgages and homeownership after filing a consumer proposal. However, the process may differ. 

The truth is that after filing a consumer proposal, you are perceived to be a high-risk client by the banks. As such, lenders may shy away from renewing your mortgage until they are confident that you can pay off debts. Most standard lenders do not finance mortgage renewals until two years of clean debt payments have passed upon completing the consumer proposal. Alternative lenders are more open to mortgage renewals after consumer proposals, as long as you have equity. Some of them can even help you pay off the remaining balance on a consumer proposal! 

There are several things you should expect during mortgage renewal after a consumer proposal:

  • High-interest rates: The lender takes up a high risk to finance your mortgage. As such, expect high-interest rates to reflect the risk.
  • Rebuilding creditworthiness: Yes, the consumer proposal affects your creditworthiness and places you in a “high-risk” category. However, there are other things you should do during and after the consumer proposal to improve your creditworthiness. For example, lenders will look into your ability to making payments on time, having a stable income, and have employment. 
  • After experiencing a consumer proposal, it’s crucial to have the “what can you afford monthly” conversation to avoid plummeting into debt once more.  Ultimately, what you can afford affects the mortgage you qualify for. 

How Can I Qualify for a Mortgage Renewal After a Consumer Proposal?

  • After filing a consumer proposal, you’ll want to know how quickly you can purchase a home or apply for a mortgage. While the standard two-year waiting period applies for lenders such as banks, you may have to wait up to five years. 
  • First, pay off your consumer proposal completely before considering renewing a mortgage or applying for a first-time mortgage. If you’re already struggling with debt, the last thing you need is to take on more debt. 
  • Second, save at least 20% down payment for the mortgage. The down payment not only reduces your monthly payments but also lowers your interest rates. You’ll mostly be working with a B-list lender or a private lender. Therefore, the interest rates are high.  In this case, saving for a down payment works to your advantage.
  • Clean up any errors on your credit report before applying for a mortgage. In many cases, payments do not reflect on your report immediately. 
  • Pay all your debts on time during the two years after completing your consumer proposal. You should also pick up at least two lines of credit—for example, a credit card, loan, or a line of credit to re-establish your creditworthiness. 
  • Consumer proposals stay on your credit report three years after you finish the debt payments or six years from the date of filing the consumer proposal. The period can be as long as five years, depending on your situation. You can choose to wait this period out and apply for a mortgage under the same criteria as before the consumer proposal. 

Get a Mortgage Renewal Today

Financial difficulties can be very stressful, but with the right mentors, there is a solution! We at Dominion Lending Centres help you find a mortgage renewal with the right lender after a consumer proposal. Call us today to discuss your options.

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