Mortgage with a Consumer Proposal.

What is a Consumer Proposal?

A consumer proposal is a legal arrangement between yourself and creditors that is administered by a Licensed Insolvency Trustee.  The LIT will work with you to create a proposal to your creditors to address your outstanding debt. You will be asked to disclose your income, assets, liabilities and the equity in your home. You will either be able to reduce the debt owed by a percentage or extend the time you can repay the debt. Your payments are made to the LIT who then disburses the payments to each respective creditor.  During the period of your consumer proposal, if your creditors have garnished your wages or filed a lawsuit against you, these actions will be halted. Note that a consumer proposal cannot exceed 5 years, and will usually stay on your credit report for 3 years from the discharge date. 

What is a Bankruptcy?

A bankruptcy is an option that provides financial relief to consumers, corporations, and partnerships who are struggling with an overbearing debt load. Similar to a consumer proposal, a licensed insolvency trustee acts is involved and acts in the interest of yourself and the creditors. What is known as a ‘stay of proceedings’ is granted which prevents legal action against you from one or more creditors. Your income, assets, liabilities and the equity in your home are also assessed to determine if you qualify to file for bankruptcy. Note that a bankruptcy will stay on your credit report for 6 years after the discharge date. If you file for a second bankruptcy, your first bankruptcy will reappear on your credit report for a period of 14 years along with your second bankruptcy. 

When Can I Obtain a Traditional Mortgage Approval? 

If you approach any prime or traditional mortgage lender the chances of receiving a mortgage are slim-to-non-existent. Being in an active insolvency sets off the high-risk alarm to your mortgage lender. Although we understand and are aware that bad times happen to good people, your bank takes a different position. In fact, even after you discharge from your consumer proposal or bankruptcy, you must go through what is known as a credit re-establishment period. Most traditional mortgage lenders will consider providing you financing after 2 years from the discharge date, provided you have re-established your credit. This is made possible by taking out a secured credit card or opening another credit facility, and being credit responsible. Once you are able to demonstrate to your traditional lender that you are credit-worthy, after the 2 year discharge period, you might be a candidate for a mortgage approval. 

When Can I Obtain an Alternative Mortgage Approval? 

It is possible to obtain a mortgage through an alternative bank lender in order to discharge a consumer proposal. This fast-tracks the traditional minimum 2-year credit re-establishment process. Although there will usually be a rate premium to do so, subject to a number crunch, it might be cost friendlier than a private mortgage for 2 or more years. This can make or break the difference of waiting many years to refinance or also being able to purchase a home. 

When Can I Obtain a Private Mortgage Approval? 

With a private mortgage you are able to borrow money while you are in the midst of a consumer proposal. That’s right. We just require approval from the insolvency trustee which comes in the form of a written letter. Similarly, a private mortgage can also be used to discharge your consumer proposal or bankruptcy. Albeit private mortgage funds have a risk factor that translates to a rate premium, a private mortgage is meant to be a bandaid solution. If your bank won’t advance you funds during your insolvency or after, it might make sense to pay a premium to begin the re-establishment process. Your private mortgage can be a bridge of troubled water that helps you convert back to a traditional lender. 

At DV Capital Corporation we are exceptional at understanding our clients circumstances and work relentlessly to provide tailored solutions. This post is simply meant to advise you of your borrowing options. It is important, and most helpful for you, to speak with a mortgage professional for a detailed review and synopsis of realistic options.