Posted: 1 Jun

The Impact on Mortgage Renewals After Consumer Proposals

mortgage renewals after consumer proposal

If you owe more than you can pay off, you can sign a consumer proposal to help you manage crippling debt. A consumer proposal enables you to negotiate a payment plan with your creditors and protect you from debt collectors. If you're thinking of going through with the process, you're probably wondering what happens to your mortgage renewal after a consumer proposal. After all, you want to keep your home among other secured assets. Call Dominion Lending Centres today to learn more.

Can I Keep My House After a Consumer Proposal?

After signing a consumer proposal, usually you can keep your home. A consumer proposal helps you keep your assets while you work on your debts. Your Licensed Insolvency Trustee (LIT) works with you to develop a plan to pay off unsecured debts. However, secured debts and equity in your home can remain intact. Also, your lender cannot cancel your mortgage because you have filed a consumer proposal, but they can call the mortgage if it comes up for renewal at the end of your term. 

The main advantage of a consumer proposal over bankruptcy is that you get to keep your home's equity. Instead, the LIT uses the amount of equity to calculate how much you should pay the creditors over a given period. In bankruptcy, you have to give up the equity in your home and use it to pay your debts. 

Do I Have to Make Mortgage Payments After a Consumer Proposal?

A consumer proposal does not change the nature of your mortgage payments. You should keep making regular and timely mortgage payments, especially to improve your mortgage renewals after consumer proposals. If you fall behind on your payments, your mortgage lender can seize your home by starting the foreclosure process.

Does a Consumer Proposal Affect My Mortgage Renewal? 

Usually, mortgage renewals after consumer proposals should go on smoothly because lenders do not require a new credit application. You can renew your mortgage with your current lender as long as you pay on time. 

However, it's crucial to remember that consumer proposals affect your credit rating. Therefore, there is a possibility that while mortgage renewals after consumer proposals will happen, they won't happen at your current rates. Your rate will depend on several factors, including your debt-to-income ratio and credit payment history. 

If you choose to refinance your mortgage or file a mortgage renewal after a consumer proposal with new lenders, remember that your new credit rating will be a factor. Since you'll make a new application, the lenders will scrutinize your credit report and offer you higher rates, or possibly deny your renewal or refinancing request. This is why working with an experienced mortgage broker is crucial!

It is, therefore, better to stick with your current lender for mortgage renewals after consumer proposals. Changing lenders increases your risk and interest, which is not ideal considering you're already in debt. 

Does a Consumer Proposal Stop You from Becoming a Homeowner? 

Consumer proposals do not prevent you from buying a home. However, the consumer proposal appears in your credit report and affects your credit rating. Fortunately, you can take several steps to improve your credit rating and successfully apply for mortgage renewals after consumer proposals. 

As long as you pay off your debts on time, you automatically improve your credit rates. Also, saving a 20% down payment for a home and having a stable income improve your chances of buying a home in the future. 

Applying for a Mortgage After a Consumer Proposal

After filing a consumer proposal, lenders are keen on the following: 

  • The two years after the discharge of your consumer proposal. Actions such as paying bills and loans on time affect your credit rating and show if you're ready to handle mortgage payments. 
  • New credit facilities such as a bank credit card and credit amounting to $2500 for each credit facility (minimum of 2).
  • Savings, especially for a down payment.

Do You Need Help with Mortgage Renewals After Consumer Proposals?

At Dominion Lending Centres, we help you qualify for a mortgage renewal after a consumer proposal. Reach out today for more information.

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