Will A Consumer Proposal Affect My Mortgage?

“Will a consumer proposal affect my mortgage?” The answer is “no” so long as your payments are being made on time.

Your mortgage can’t be terminated because of a consumer proposal

The Bankruptcy & Insolvency Act states that “no person may terminate or amend any agreement, including a security agreement, with the consumer debtor, or claim an accelerated payment, or the forfeiture of the term, under any agreement, including a security agreement, with the consumer debtor, by reason only that the consumer debtor is insolvent or a consumer proposal has been filed in respect of the consumer debtor“.

Will a consumer proposal affect my mortgage renewal?

If your mortgage payments are being been made on time, you shouldn’t have any issues renewing your mortgage with your current lender.

Will a consumer proposal affect a new mortgage application?

On the other hand, if you would like to move it to another lender, you will need to make a new credit application and will undergo a credit check.

Using a mortgage broker

Since a consumer proposal does negatively affect your credit rating, it may be challenging for you to obtain a mortgage at a preferred rate. It’s also quite possible that your application might be refused. We would suggest that you contact a licensed broker to evaluate your individual circumstances.

Rebuilding your credit

What a broker might suggest is that you take steps to start rebuilding your credit as soon as your consumer proposal is approved by your creditors:

• • If your goal is to apply for a new home mortgage, lenders generally use a 2/2/2 rule: 2 years discharged, 2 new credit accounts, $2,000 minimum credit limits with good repayment history. The easiest way to start is to obtain a secured credit card. Because your credit utilization rate is a major factor in your credit score, try to get card with a moderately higher credit limit (e.g. $2,000) – using a card with too low a credit limit will be of limited use in rebuilding your credit score.
  • Use your credit card consistently – use it for everyday purchases and pay off the balance in full at the end of the billing cycle. By doing this, you’re reestablishing your payment history. Doing this over a long period of time will gradually increase your credit score since the length of your credit history contributes to your credit score.
  • Once you’ve established a track record with your secured credit card, you’ll be getting offers from credit card and loan companies. Don’t accept too many offers in too short a period of time, since data related to new credit applications contributes to credit score.

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