What happens to my mortgage when I file a consumer proposal?
When you file a consumer proposal you are able to keep all of your assets such as a home or a car. As long as you continue to make the monthly mortgage payments you’ll be able to keep your home.
Your mortgage company will be notified that you’re filing the proposal but they’re a secured creditor – which means they’re automatically excluded from the process, and your filing has no real impact on them as long as your ability to make payments has not changed.
Technically, they kind of benefit in the long run – your proposal will reduce your debt and stop interest charges which puts you in a more stable financial position, and the likelihood of mortgage default is reduced substantially.
As far as payments go, you’ll continue to make your mortgage payments as you did before the proposal.
Can I renew my mortgage during the proposal?
It depends. If you continue to make on-time payments and fulfill your mortgage obligations there typically won’t be any issues. Especially considering that most lenders auto renew.
However, if you missed a few payments, your income situation changed significantly, or anything else happened besides the proposal that may give a lender a reason to worry about your file – they may refuse renewal or change the interest rate terms.
But keep in mind, if you’re already having problems with your mortgage company you’ll likely have challenges renewing with or without a proposal.
Can I be approved for a mortgage if I file a consumer proposal?
Again, it depends. Are you planning to buy a home after the proposal is paid off or while it’s still in effect?
There are 4 main things lenders consider when approving a mortgage – employment or income situation, down payment amount, co-signers, and credit history.
If you’re applying during the proposal they will definitely be more rigid and review your file with more scrutiny. If you have a solid job and a down payment of more than 20%, they’ll likely approve you with no issues. The key here is how risky you are to the lenders. If you want to put down 5% and barely qualify with your income, they won’t approve you.
On the other hand, if your proposal is paid off and you’ve started to rebuild your credit the chances of approval increase significantly. In addition, the more time passes after the proposal the better it is. And after 3 years, the proposal record is cleared off completely – it’s like you never filed.
In short, it’s definitely possible to purchase a home during or after the proposal. However, keep in mind that a consumer proposal is a debt relief program after all and until it’s completely removed from your credit history (3 years after its paid) the lenders will always look at your application more thoroughly.
We also recommend that before filing or making any decisions regarding consumer proposal or bankruptcy you contact us for a free, no-obligation consultation. We’ll provide our opinion on what may be the best course of action for your particular situation. Just click below to fill out a contact request and we’ll get back to you in 24 hours or less.
