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From Consumer Proposal to Home Sweet Home: Your Guide to Mortgage Eligibility

Mortgage with Consumer Proposal

Key Takeaways

Filing a consumer proposal can provide financial relief to overcoming debt. While a consumer proposal will have a negative impact on your credit record, you can still qualify for new debts such as a credit card and mortgage, but more likely with an alternative lender. You can also file a consumer proposal with a mortgage and will still be able to keep your home if you continue to make the monthly mortgage payments.

What is a Consumer Proposal?

A consumer proposal is a legally binding agreement between a debtor and their unsecured creditors. It is an alternative to filing for personal bankruptcy and offers a way to reduce debt obligations and monthly debt payments by repaying their debts over a certain period. A consumer proposal will include all unsecured debts such as credit card debt, lines of credit, payday loans and more.

In a consumer proposal, creditors agree to accept a reduction in the amount they are owed in exchange for repayment of a new agreed-to amount. A consumer proposal must be completed within five years, and during this period, the debtor will make regular payments to the Licensed Insolvency Trustee who will then distribute the money to creditors.

Consumer proposals can be a great way to obtain debt relief by stopping all interest on debts and can even reduce the total debts owed. Click here to find more information on a step-by-step guide to filing a consumer proposal.

How Does a Consumer Proposal Impact Your Credit Rating?

A consumer proposal will impact your credit score and remain on your credit report for three years after the completion of the proposal or six years from when filed, whichever comes first. However, unlike bankruptcy, you can still apply for new credit during a consumer proposal such as a credit card.

The negative impact on your credit rating can make it more challenging to obtain credit in the future, including getting a mortgage. However, because you avoided bankruptcy your credit rating should not be as negative as filing for bankruptcy, as you will have an R7 rating instead of an R9 rating for bankruptcy. You can find out more here about how a consumer proposal and bankruptcy affect your credit rating.

What Happens to My Mortgage During a Consumer Proposal?

If you are about to file a consumer proposal with a mortgage then you are probably concerned about how it will be affected. The good news is mortgages are a secured debt and is not affected by filing a consumer proposal. The Licensed Insolvency Trustee will send notice to your mortgage lender for your consumer proposal but it shouldn't affect your current mortgage,

During the consumer proposal, you can keep your house and mortgage as long as you continue making your usual mortgage payments as you did before filing a consumer proposal.

Can You Buy a Home During or After a Consumer Proposal?

In a consumer proposal, you don't have to wait for it to finish before you can purchase a house with a mortgage. While in a consumer proposal, you can obtain new debts such as a credit card and mortgage, it may be more difficult to get approved with traditional lenders.

If you want to obtain a mortgage while in a consumer proposal, you may want to consider looking at alternative lenders who may be more likely to provide you with a loan. However, they will more likely charge you a higher interest rate than a traditional lender because they will consider you a higher credit risk.

If you are planning to purchase a house while in a consumer proposal, it may be beneficial to first pay off your consumer proposal. Once your consumer proposal is approved by your creditors, you can pay it off as soon as possible with no penalties. Paying off your consumer proposal early will start the period from when your included debts and R7 rating will come off your credit history.

Purchasing a new house will also require a down payment, so you will want to save money to be eligible to purchase a house. During this time you can apply for a secured credit card or unsecured credit card to show activity on your personal credit history. This will help you improve your personal credit record by making monthly payments on time.

refinancing mortgage

Will a Consumer Proposal Affect My Mortgage Renewal?

When your mortgage comes up for renewal, mortgage lenders typically don't require you to make another application. Your mortgage can be automatically renewed if you stay with the same lender. However, you may not get the best market rate available, but you won't have to worry about reapplying for mortgage financing at the end of the term and can continue living in your home.

Can You Refinance Your Mortgage to Pay Off Your Consumer Proposal?

Refinancing your mortgage to pay off a consumer proposal can be a smart way to tackle large debts, especially if there's enough equity in your property to support an increased loan. However, there are a few factors to consider before proceeding. For instance, prepayment penalties from early mortgage renewal could offset the benefits of refinancing, so it's crucial to weigh the costs.

Lenders will also examine the reasons behind your consumer proposal, assess your credit score, and look for signs that you're working to improve it, to determine if refinancing is a safe option. If approved, refinancing offers several advantages, such as improved credit by removing the R7 rating on your credit score sooner and more access to credit such as credit cards.

How Long After Filing a Consumer Proposal Can I Get a Mortgage?

You can get qualify for a mortgage while in a consumer proposal or anytime after completing the consumer proposal. It all depends on the lender's willingness to work with you and whether they will be willing to provide you with a mortgage based on your finances.

Will a Consumer Proposal Impact My Ability to Get a New Mortgage?

It's possible to get a mortgage after a consumer proposal, but it may be more challenging. Lenders consider a consumer proposal a red flag, indicating that you've had financial difficulties in the past. However, if you've completed your consumer proposal and have taken steps to improve your financial situation, you may be able to get a mortgage at most financial institutions.


Working with a mortgage broker with experience helping clients with a consumer proposal is essential. They can help you find lenders more likely to approve your mortgage application and provide you with the best rates.


In conclusion, a consumer proposal is a viable alternative to bankruptcy for individuals struggling with debt. While it will have an impact on your credit score and make it more challenging to get a mortgage, it's still possible to get a mortgage after completing a consumer proposal.

The key is to work with a mortgage broker who has experience helping clients in your situation and finding lenders who are more likely to approve your mortgage application. By taking the time to understand the relationship between consumer proposals and mortgages and making informed decisions, you can get back on track financially and achieve your homeownership goals.

Please contact us for a Free Consultation if you have further questions about applying for a consumer proposal with a mortgage.



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