What You Need to Know about Mortgage Renewals After Consumer Proposals
Being unable to pay your debts when they are due can be stressful. If you are in such a situation, there are options. You can ease your financial woes by filing a consumer proposal. Contact us to learn more.
Many homeowners or people looking to buy homes wonder whether mortgage renewal after a consumer proposal or bankruptcy is possible. It is, but there are some caveats. Before getting into the details, let's differentiate between bankruptcy and a consumer proposal.
Bankruptcy
Bankruptcy is a legal debt relief process involving giving up your assets to pay debts. A Licensed Insolvency Trustee (LIT) controls your assets, investigates your activities, and tracks your progress on bankruptcy obligations. If you're considering mortgage renewal after bankruptcy, seek the advice of a mortgage broker.
Consumer Proposal
A consumer proposal is a legal agreement with your unsecured creditors to pay your debts under more favourable conditions. A trustee negotiates new payment terms on your behalf. Typically, it involves extending the payment period or slashing the debt amount. You must pay the new arrears over a specified period.
The arrangement comes with several benefits. For instance, interest stops accruing on debts the day you file a consumer proposal. You also get protection from wage garnishment and debt collection.
Can a consumer proposal lead to you losing your home? What does a borrower have to fulfill to qualify for a new home loan or mortgage renewal after a consumer proposal? Read on.
A Consumer Proposal Safeguards Your Home
Unlike filing for bankruptcy, a consumer proposal doesn't require you to surrender your assets. You won't lose your home so long as your offer satisfies your creditors.
Secondly, you will be remitting the monthly payments outlined in your consumer proposal to your LIT. The trustee will then distribute various amounts to your creditors. Knowing the amount of money to pay every month will help you fit your mortgage and proposal payments into your budget.
Further, your mortgage lender can't change your mortgage terms because you have filed a consumer proposal. A foreclosure on your home only occurs when you fail to pay your home loan.
Mortgage Renewal and Consumer Proposal
You should not have problems with mortgage renewal after a consumer proposal or bankruptcy once you are discharged of your debts. But there are two conditions:
- You must have cleared all your past mortgage payments
- You should prove to your mortgage lender the ability to continue with future payments
The effects of mortgage renewal after a consumer proposal and after bankruptcy are comparable. Most mortgage lenders will consider you a high-risk client. Therefore, it might be hard for you to get favourable interest rates. You can improve your chances of better rates by making payments on the current mortgage regularly and on time.
Another challenge is that filing a consumer proposal or bankruptcy adversely affects your credit history. For this reason, it becomes difficult to switch lenders and secure new home loans.
Focus on building your credit to have friendlier terms for mortgage renewal after a consumer proposal or bankruptcy.
Bad Credit Mortgage Renewal
After a consumer proposal, consider working with the Bad Credit Mortgage Brokers at Dominion Lending Centres to access a pool of lenders with more flexible terms. You'll find trust companies and credit unions with lenient options for clients looking for mortgage renewal after a consumer proposal or bankruptcy.
Additionally, a mortgage broker accesses your credit report only once before searching for mortgage renewal facilities. Making fewer inquiries on your file protects your credit score from worsening. Call us today to see how we can help you.
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