Securing a mortgage with a consumer proposal: A comprehensive guide

consumer proposal

A consumer proposal is a legal process in Canada that allows individuals to resolve their debt by making a proposal to their creditors to pay a portion of their debt over a period of time, usually between 3-5 years.

It provides a way for an individual to avoid bankruptcy and make manageable payments to their creditors.

However, if most creditors accept the proposal, it becomes binding on all creditors, even those who did not vote in favor of it.

The big question is: Can you get a mortgage with a Consumer Proposal? And if yes, how to secure it.

Let us discuss all this and more.

How Does a Consumer Proposal Impact Your Home or Mortgage?

Mortgages in Canada are generally structured as amortized loans, which means that the borrower makes regular payments that include both interest and principal.

When an individual files a consumer proposal, they may be able to keep their home and continue making payments on their mortgage, depending on the terms of the proposal.

However, the consumer proposal may impact their credit score and the likelihood of obtaining credit in the future.

In a consumer proposal, the licensed insolvency trustee will work with the individual to develop a plan that is affordable for them. 

The consumer proposal is binding for the mortgage lender, so if the majority of the creditors accept the proposal, the lender must also accept the terms of the proposal.

It’s also necessary to remember that a consumer proposal will remain on your credit record for 3 years after it has been concluded, which may impact your capacity to get financing in the future. 

Can you Lose your House After Filing a Consumer Proposal?

Individuals may lose their homes if they file for a consumer proposal, but it is not inevitable. It depends on the individual’s financial situation and the terms of the proposal.

 If the individual can continue making payments on their mortgage, the proposal will likely include those payments as part of the plan. However, if the individual cannot continue making mortgage payments, the proposal may consist of a plan to surrender the home to the lender.

Filing a consumer proposal does not automatically mean that you will lose your home. A licensed insolvency trustee will work with you to develop an affordable proposal that considers your ability to keep your home and continue making mortgage payments.

Canadian government has also introduced a number of measures to control the housing market and protect consumers from risky borrowing. For example, stress test was introduced to ensure borrowers can afford the mortgage even if interest rates increase.

Can you Get a New Mortgage While A Consumer Proposal is Active?

It cannot be easy to obtain a mortgage while a consumer proposal is active. 

Consumer proposals are typically reported on credit reports for three years, and the fact that a consumer proposal is active may be viewed as unfavorable by potential mortgage lenders.

Also, during the consumer proposal, the debtor will have to provide their income and expenses to the Trustee and make payments to the Trustee, which can limit the funds available to make mortgage payments.

That being said, it is possible to obtain a mortgage during a consumer proposal, but it is less likely and depends on the lender and the terms of the proposal.

Some lenders may consider an individual for a mortgage during a consumer proposal if they have a strong credit history and a stable income.

However, it’s important to note that even if you are approved for a mortgage, the interest rate may be higher than usual, and the mortgage terms may not be as favorable. 

Can you Get a Mortgage After a Consumer Proposal?

It may be more challenging to obtain a mortgage after completing a consumer proposal, but it is possible. 

Many lenders will consider an individual for a mortgage after a consumer proposal if they have re-established a good credit history and stable income.

To increase the chances of getting a mortgage after a consumer proposal, it’s recommended to take steps to improve your credit score, such as paying your bills on time and reducing outstanding debt. It’s also recommended to save up for a larger down payment, as this can help mitigate the risk for the lender.

Tips to Qualify for a Mortgage After a Consumer Proposal

To qualify for a mortgage in Canada, borrowers typically need to have a good credit score and a stable income. They will also need to provide documentation, such as proof of income and employment, and may need to make a down payment of at least 5% of the purchase price.

Here are some suggestions on how you can secure a mortgage after having a consumer proposal on your record:

  1. Improve your credit score: A consumer proposal will negatively impact your credit score, so it’s essential to improve it before applying for a mortgage. You can achieve this by keeping up with your bill payments, paying down debt, and addressing any inaccuracies on the credit report.
  2. Save for a larger down payment: Lenders may require a larger down payment if you have a consumer proposal on your record, so it’s important to save as much as possible.
  3. Get pre-approved: It’s a smart option to get your mortgage pre-approved prior to actually looking for a home. This can help you determine how you are able to justify paying and the expected interest rate.
  4. Give lenders evidence of your consistent income and employment background: Financial institutions want to verify that you possess a record of solid employment and a large income. Be ready to present tax statements, proof of income, and other supporting documents. 
  5. Find a lender who specializes in working with borrowers with consumer proposals: Some lenders have experience working with borrowers with consumer proposals on their records and may be more willing to approve a mortgage application.
  6. Consider alternative mortgage options: If you cannot qualify for a traditional mortgage, you may consider alternative options such as a shared equity mortgage or a private mortgage loan. 
  7. Seek help from a mortgage broker or credit counselor: A mortgage broker or credit counselor can help you understand the process of applying for a mortgage after a consumer proposal and can help you find a lender that is willing to work with you.


Remember that the terms and requirements for a mortgage after a consumer proposal may be different than before, and the interest rate may be higher than usual. Understanding the lender’s standards and being ready to prove your potential to pay back the mortgage is crucial.

Meta Description: Let us help you understand how a consumer proposal works, how it may impact your home and mortgage, and how to secure a mortgage with a consumer proposal.

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