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Getting a Mortgage After a Consumer Proposal Ontario
For most people getting a consumer proposal mortgage is a relief. After drowning in debt and finding it difficult to keep up with the monthly repayments, lower repayment commitments can bring huge relief from financial stress. Consumer proposal can, however, make it difficult to get on with your life, since you may have problems borrowing again. You may ask yourself “How long after consumer proposal can I get a mortgage?”
Consumer proposal is an alternative to bankruptcy. Many people choose consumer proposal mortgage as an escape when they are mired in debt and unable to cope with the required monthly repayments. A consumer proposal mortgage allows people to consolidate their debts. They then pay back a monthly amount that is more in keeping with what they can afford.
While many people have no alternative, getting a mortgage after consumer proposal can come with problems. Many lenders will treat your situation much as if you had declared bankruptcy.
After you have paid up your consumer proposal you will have two alternatives for financing a mortgage – main stream lenders or alternative lenders.
Main stream lenders are more popular because the interest rates that they charge tend to be lower than those charged by private lenders.
We are here to tell you that getting a mortgage after a consumer proposal Ontario can be difficult but it is far from impossible.
No Main Stream Mortgage for Two Years After Disposal of Consumer Proposal Mortgage
Main stream lenders will refuse you credit or loans for two years after you have fully paid up your commitment on consumer proposal. That means that if you take five years to pay off the consumer proposal you could wait as long as seven before you will qualify for a loan again. It takes three years after disposal of the consumer proposal for the debts to fall off your credit list altogether.
These are the issues that the A-lenders will look for before agreeing to a mortgage
- Banks want to see whether you handle credit facilities after completing your consumer proposal. Typically, the banks will want to see that the borrower has managed to service at least two credit facilities of more than $2,000 and for at least two years. The reason the higher credit and loan requirements is that the banks want surety that you can manage credit of some significance.
- The banks will check with Equifax or TransUnion and will look for a score of 650 or more. Following your consumer proposal your credit score will certainly plunge and you will have to give it time to recover.
- You can’t have had any late payments or debt collections after the proposal was completed. This is very important as it will be treated as a red flag by most lenders. You absolutely must ensure that your record stays clean and that there are no late payments over this period.
- The banks will want to know why you filed for consumer proposal. They will also investigate whether property was involved in the transaction. They will look at the circumstances under which the consumer proposal was filed. They will want to understand whether the circumstances were out of your control or if you abused your credit facilities.
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Obtaining a Mortgage Within Two Years After Discharge of the Consumer Proposal Mortgage
When you have completed your consumer proposal you are as entitled as any other person to buy your own home. Since the A-lenders will not lend you money until you can prove that you can service your new credit facilities, you will have to approach a private lender for a mortgage after consumer disposal discharge. Private lenders are prepared to take the additional risk, offering a helping hand when other lenders will not. Private lenders are more interested in the value of the property that will secure the mortgage than in the unfortunate circumstances of the borrower. Borrowers should use this opportunity to clear their credit name so that when they re-negotiate the mortgage with a mainstream lender, they are able to negotiate the best interest rates.
A mortgage broker can help you to find a private lender with the best rates. Mortgage brokers have many lenders on their books and will present your mortgage to multiple lenders so that you receive the best combination of terms and conditions.
- You will need a down payment of at least 20% since mortgage insurers will not insure a high ratio mortgage for the first two years after you have completed the consumer proposal. The earlier you want to apply for mortgage after consumer proposal discharge the higher the required deposit. The down payment must come from your own resources. You may not borrow it or use a gift.
- Don’t forget that you will also require funds for closing costs. This is around 1.5% of the mortgage amount.
- You should check your credit score. Get a copy of your credit listing from the major credit bureaus and check that all is in order. If you find mistakes you have the right to query them and produce proof of payment.
- You will have to have a permanent source of income. It is essential for the self-employed to have all taxes paid up and up to date.
No Mortgage Until the Consumer Proposal Is Discharged
For many people life improves after consumer proposal. They are able to make the agreed payments to the trustees and may even find that they can save a little money every month. Now they want to buy their first home. While it is certainly better to consider property ownership once debt problems are cleared up, no business will give a mortgage to someone who has not completed the consumer proposal.
If you want to buy a house, your best bet would be to pay off your consumer proposal as quickly as possible and then collect your signed certificate of completion. Then you can start to save for the down payment on your house. You’ll need 20% for a down payment. Consider saving the money that you were paying for the debt. You weren’t used to having it so you should find it relatively easy.
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