Posted: 1 Jun '20

What to Know About Mortgage Renewals After a Consumer Proposal

What to Know About Mortgage Renewals After a Consumer Proposal

If you are drowning in a lot debt, you could consider entering a consumer proposal with a bankruptcy trustee. A consumer proposal offers an alternative payment plan to make monthly payments more affordable and you are still paying back money to your creditors. Depending on your circumstance, it often involves requesting to pay part of your debt over a given period of time. Contact us to learn more.

Every month, you make a payment to your trustee, who then distributes various amounts to your creditors. With regular monthly payments, you can factor your proposal payments as well as mortgage installments into your monthly household budget more easily. 

A consumer proposal can affect your mortgage in several ways. Let’s focus on mortgage renewals after consumer proposals.  

Can You Lose Your Home After a Consumer Proposal? 

A consumer proposal will take into consideration all of your debts. Sometimes your secured debts such as a car loan and your mortgage will be exempt. Even though the mortgage may not be included in the consumer proposal, it is still possible that your bank will check your credit and decide not to offer you a renewal once your term is up.  

Your home is safe as long as you continue making the payments that you agreed to while you are inside the term of your mortgage. Mortgage lenders can't change loan terms once someone has filed a consumer proposal while they are still inside the contract term. However, a bank can “call the loan” and put you into foreclosure on your home for having missed payments, and they can also do this at renewal time if they check your credit and are not happy with what they see. Some lenders will just send you an auto-renewal without checking your credit, in which case it is easy to just sign and carry on. 

If your bank does not offer you a renewal, then it is important to come up with a plan. This can include getting a new lender on board, and if you do this then you will also want to consider taking out enough money to pay off the consumer proposal in full. This only works if you have enough equity. 

Mortgage Renewals After Consumer Proposals 

Renewing your mortgage after filing a consumer proposal could be as easy as singing with your bank if you have made all your payments on time.  

However, it might be difficult for you to get a favourable interest rate. Some banks, after checking your credit will increase your interest rate substantially. This is an example of when it would be a good time to explore switching lenders to see what else is available to you. This is often best accomplished by working with an experienced mortgage broker, as many of the banks that will help you after a proposal are available only through the broker channel. 

Consumer Proposals and New Mortgages 

Securing a new mortgage after filing a consumer proposal is easier when you are dealing with an expert. An experienced mortgage broker can help you secure a new lender in the short term, but also put a plan in place to fix your credit in order to get back into a lower interest rate mortgage as soon as possible. This plan should at a minimum include the following: 

1. Rebuild Your Credit 

Rebuilding your credit is vital for both new mortgages and mortgage renewals after consumer proposals, and it's possible. One way is acquiring a secured credit card and making purchases with it. Paying the bills on time will help repair your credit rating. A bad credit mortgage expert in your area can give you more tips. 

2. Pay Off the Consumer Proposal as Soon as Possible 

Most mortgage lenders with good rates will want at least 24 months from the date of discharge. If you have equity to pull out of your home and pay off the consumer proposal immediately, then that will start the 24 months right away, and get you back into a lower rate sooner.  

3. Shop for a Shorter Term Mortgage 

Your interest rate will most likely be higher than what most mainstream banks are offering. So, look for a short-term mortgage, for example one or two years maximum. You'll avoid paying the higher amounts of interest for longer than necessary, and you can plan to fix your credit during that contract period. 

We Can Help 

Many people find themselves in a difficult financial situation at some point in their life. There are many things you can do to get back on track, and a consumer proposal may be the right answer, depending on your circumstances. If you are having trouble with mortgage renewals after a consumer proposal, or securing a new mortgage, we may be able to help! Contact our team today.  


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