Questions: At what point can I get a mortgage during a consumer proposal? If so, what are the (ball park) interest rates usually offered? Would a refinance be better if I currently own my home? Do you think my current lender would renew my current mortgage if I have recently filed a consumer proposal?
Mortgage Application During Consumer Proposal
The answer depends – are you talking about renewing your existing mortgage or getting a new mortgage entirely? In most cases, if your existing mortgage is up to date, you will have no problem renewing your mortgage and may even be able to refinance your existing mortgage. If you start a consumer proposal and then attempt to get a new mortgage, it will be much more difficult.
You can apply for a mortgage during your consumer proposal. However, because you are in a consumer proposal it will be more difficult to qualify than if you were not in a consumer proposal. Your credit report will contain a notification that you are enrolled in a consumer proposal however that does not mean that you will automatically be denied. Here are some steps we recommend to help you successfully apply for a mortgage if you need to during your consumer proposal:
- First save for a down-payment. Your mortgage lender will not likely approve a high risk loan unless you have a significant down-payment already.
- Create a budget to bring to your mortgage lender to show that you have the ability to make your monthly payments. Consider that you will likely be paying a higher interest rate than normal if you are considered a higher risk borrower.
- Ask your bankruptcy trustee (or consumer proposal administrator) to provide a letter that you have been making payments under a consumer proposal and that all your payments have been made on time and in full.
- Read our article on what you should know about applying for a mortgage. This article contains information that can help you get a mortgage, even if you are in the middle of a proposal.
These steps will not guarantee that you will be approved for a mortgage during a consumer proposal but they can help. You may have to shop around, applying at not only you local bank, but at your local credit union or even talk to a mortgage broker. In most cases, if you qualify, the mortgage interest rate will be one or two points higher than you would get if you had perfect credit, but that will also depend on your income, equity in your house, and other factors.
If you are considering filing a consumer proposal and have questions about mortgages and a consumer proposal or bankruptcy, contact one of our expert bankruptcy trustees today. They would be happy to answer your questions.