Does a Consumer Proposal Affect my House and Mortgage?
House and Mortgage Debt in a Consumer Proposal
If you are having trouble paying your debts when they are due, then a consumer proposal may be a good option for you.
When you take out a consumer proposal, you will make an offer to all of your unsecured creditors and you will pay your debt under the new terms that you can afford.
A consumer proposal will usually involve extending the time that you have for your debt as well as helping you to set up a payment plan that you can actually afford.
When you have made the payments and when you have fulfilled the duties that often come with a consumer proposal, you can then erase your remaining debts.
The main thing that you need to know about consumer proposals is that they will affect your credit rating and you will also have a note put on your report too.
This note will stay there for three years after you have completed the proposal.
If you are worried about losing your home because of your proposal, then this guide will help you to get the answer you’re looking for.
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Your Home and your Consumer Proposal
In most cases, you won’t lose your assets if you file for a consumer proposal, but you do have to make sure that your offer is enough to satisfy your creditors.
This ultimately means that as long as you carry on making payments, you will probably end up keeping your home.
Speaking with an insolvency trustee will help you here.
A mortgage lender will not be able to change the terms of your mortgage if you happen to file for a consumer proposal either.
The only way that they can foreclose your property is if you have missed some payments.
If you carry on making your payments however then you should have no issues at all.
Paying your Trustee
When you take out a consumer proposal, you will normally make a payment to your trustee every month.
They will then distribute your payment to all of your creditors.
Having a standard monthly payment will make it much easier for you to budget and you should be able to fit your mortgage payment and your proposal payments into the budget you have for your household.
You have to remember that your consumer proposal will be filed to your unsecured creditors.
If you have secured loans, such as an automobile or even a mortgage then this will not be included in your proposal.
If you are unable to make your payments, then you need to speak to your lenders directly if you can.
Renewing your Mortgage
If you know that you need to renew your mortgage after you have filed a consumer proposal then you probably won’t have a problem, as long as you have not missed any mortgage payments in the past and as long as you are able to show your lender that you can make any payments in the future.
You should know though, that a consumer proposal can make it much more difficult for you to switch mortgage lenders and it can also make it harder for you to get a favourable interest rate too.
A consumer proposal will stay on your credit file for 3 years too.
That being said, bankruptcy will stay on your credit file for 6 years so when you compare them both, you will soon find that it is a much safer option.
It’s also vital that you remember that because you were in a difficult situation before you filed your proposal, getting a favourable interest rate would most likely be difficult.
Getting a Mortgage After a Proposal
It can be much more difficult for you to get a new mortgage after you have filed for a consumer proposal.
The main reason for this is because a consumer proposal will impact your credit rating negatively.
That being said, you may still be able to get a mortgage.
If you want to increase the chances of getting a mortgage, then you need to follow the guidelines below.
Rebuild your Credit
The first thing that you need to do is take the right steps to rebuild your credit rating.
Think about taking out a secured credit card and use this for all of your purchases.
You can also pay any bills you have on this credit card too, as this will help you to restore your credit.
It may be that you need to take out financial counselling as part of the consumer proposal process.
It’s important to know that these sessions will give you the guidance you need on how to restore your credit, so that you can then make better and wiser decisions in the future.
Look for a Shorter Term
If you have a mortgage then the interest rate will probably be higher.
If you want to get around this then get a one or two year fixed-rate mortgage.
This will let your credit recover during this time and you can also avoid paying steep rates for longer than you actually need to.
It’s also helpful to put down a bigger down payment too.
If you save up and put down a bigger payment, then this will certainly help you with your mortgage.
A lot of mortgage lenders will look for 20% or more in most cases.
Choose a mortgage lender who is going to cater to your needs.
It may be that you need to start out with a smaller property and then move up the ladder on a later date.
Either way, getting on the property ladder is the main thing.
When you are able to do this, everything else will fall into place.
If you need some advice or some support regarding your consumer proposal, then please do get in touch with us today.
When you do, you will soon find that we can give you the support you need throughout the whole process as well as helping you to understand the consequences of filing for a consumer proposal in general.
You can contact us by phone or by email.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal