Will a Consumer Proposal Affect My Mortgage Renewal?
For Canadian consumers, a consumer proposal that alleviates the burden of some debt does not mean you must give up your home. The action does, however, impact your credit rating or beacon score and could be a factor as you approach a mortgage renewal. Contact us to get started.
What Happens with a Consumer Proposal?
A consumer proposal should not mean the loss of your home if you have continued to make your mortgage payments on time. And, your mortgage lender may not change the terms of your loan as a result of your consumer proposal.
The consumer proposal is intended to eliminate at least a portion of your unsecured debt. You may consider this course of action if your debts become overly burdensome and threaten your ability to make your mortgage payments or pay for such necessities as food, heat, and transportation to work.
Working with an insolvency trustee, you make a proposal to your unsecured creditors to pay a portion of the debt over a period of years. You agree to pay a specified amount each month to the trustee, who then forwards the payments to the creditors.
Ideally, the process makes it easier for you to make both your mortgage and the proposal payments each month. If you stay current with your home loan payments, this action should not affect your existing mortgage.
How Can I Get Mortgage Renewals After Consumer Proposals?
Typically, mortgages in Canada are for 5-years with amortization over 25 years. This means that homeowners who remain in their homes will need to renew their loans after each five-year period. Lenders are not required to renew if they should so choose.
So, is borrowers apply for mortgage renewals after consumer proposals, how does this impact their qualifications?
- If you have stayed current with your mortgage payments throughout the consumer proposal proceedings, you have a better chance of renewing with your existing lender. They may ask you to prove that you can continue to pay on time.
- Note that securing mortgage renewals after consumer proposals may be a function of timing. Consumer proposals remain on your record for three years after the procedure is completed. So, if you have completed a consumer proposal in the first two years of your mortgage agreement, you should have a better chance of renewing with your current lender.
- If the renewal is due shortly after your consumer proposal completed, the problem may become difficult, particularly if your mortgage payments have been erratic.
If the current lender rejects your renewal, you may find it more difficult to switch to a receptive alternative lender at current lower rates.
Steps Toward Securing Mortgage Renewals After Consumer Proposals
Your chances of securing a new mortgage with a conventional lender become remote if:
- Your payment history has been erratic with your current lender.
- You have not been timely with your consumer proposal payments.
- Your credit score continues to drop.
In these instances, you should do the following:
- Work with a Reputable Mortgage Broker
Some mortgage brokers specialize in helping consumers with difficult credit scores and to qualify for mortgage renewals after consumer proposals. They will seek out alternative or private financing on your behalf to help you to keep your home while rebuilding your credit reputation.
- Proactively Rebuild Your Credit Rating
Apply for a secured credit card, use it, and make the payments promptly. Pay the balance in full each month.
- Apply for a Shorter-Term Renewal
Since your credit rating has been negatively affected and available rates will be higher, you are better off applying for a shorter-term renewal while striving to improve your credit and payment history.
- Offer a Larger Down Payment
While this may seem like an impossibility following a consumer proposal event, offering 20% or more of the remaining balance can improve your chances.
See Bad Credit Mortgage Brokers
In Edmonton, contact Dominion Lending Bad Credit Mortgage Brokers to help with your renewal. We specialize in bad credit circumstances and can help you find a viable lending solution. Our experts will advise how to get your finances back in order to qualify for a mortgage renewal after a consumer proposals.
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