Posted: 1 Dec '21

Stressing about Your Mortgage Renewal After a Consumer Proposal? Here’s What You Need to Know.

Stressing about Your Mortgage Renewal After a Consumer Proposal? Here’s What You Need to Know.

When your debt burden becomes challenging to handle, a consumer proposal is one of the ways you can seek debt relief. This arrangement helps you pay off your creditors over time, and avoid losing your assets, including your home. Unfortunately, while a consumer proposal helps you pay your debt, it doesn't resolve your mortgage renewal woes. Here is what you should know about mortgage renewals after consumer proposals.  Call us today to learn more.

How Does a Consumer Proposal Affect You?

A consumer proposal is a debt relief solution that allows partial payments to creditors and forgiveness of the full debt. Many people in debt seek consumer proposals instead of filing bankruptcy, which is often the second option. 

However, while consumer proposals are great for resolving debt, they don't resolve your mortgage payments. Why? Your mortgage debt is secured and is secured against your home. This means that if you fail to pay your debts, your lender will seize your home to recoup their losses. However, this is an advantage because the consume proposal protects your assets. 

Filing a consumer proposal does not affect your mortgage as long as you make your payments. Your home remains in your possession unless you default on your mortgage payments. The lender cannot change the terms of your contract or seize your home. 

Unfortunately, once your current mortgage term expires, you need to renew the mortgage contract. Mortgage renewal after a consumer proposal means that lenders will renew the terms of your contract and scrutinize your credit report. 

What Happens to Mortgage Renewals after Consumer Proposals?

While nothing happens to your current mortgage, some changes occur during mortgage renewal. A consumer proposal is a debt relief solution, which means that you cannot pay your debts. There's a high likelihood that your credit score will deteriorate before you file the consumer report because of the late or missing debt payments. 

In addition, a consumer proposal stays on your credit report three years after you complete your payments. This means that lenders will see your history of a consumer report long after finishing the proposal. For example, if you have a four-year consumer proposal, it will stay on your record for a total of seven years. 

Usually, a consumer proposal gives you an R7 and/or I7, which affects your mortgage renewal. With poor credit ratings, you may be ineligible for a mortgage renewal with a prime lender. Also, even if you qualify for a mortgage renewal with an alternative lender, the interest rates could be higher.

Can I Get a Mortgage Renewal After a Consumer Proposal?

While it is complicated to qualify for mortgage renewals after consumer proposals, it’s possible. You can qualify for mortgage renewal by taking several essential steps. 

First, rebuild your credit score. Talk closely to your credit counsellor to find ways to boost your credit score. You can also improve your credit score by applying for new lines of credit and paying your debts fully and on time. For example, if you get a credit card, pay each bill on time, and try and keep your credit utilization below 75% of the high credit limit. 

Second, make sure you have a reliable income to improve the chances of lenders considering you for renewals. Also, pay all your bills on time to improve your credit report. 

It's best to get a short-term mortgage and renew it when your credit score and report have improved. Your first mortgage renewal after a consumer proposal may have higher interest rates. However, as you improve your credit score, you'll qualify for better mortgages. 

Where Can You Find a Mortgage Renewals After a Consumer Proposal?

Consumer proposals affect your credit score and mortgage renewals. However, with Dominion Lending Centres, you can find the right lender for you. Contact us today to explore your options with mortgage renewals after consumer proposals.

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