You signed a consumer proposal to get your debt under control, and that can be a great decision for many people. But now your mortgage renewal date is creeping closer, and you’re wondering if that proposal has limited some of your options. At Mortgage Connection, we understand that all the details can be confusing, which is why our team is here to help you understand how it works.
Yes, you may be able to renew your mortgage while you’re in a consumer proposal. Many homeowners are able to stay with their existing lender, but approval depends on your lender and financial circumstances. The path takes a little planning, but it’s more open than you might think, so it helps to understand how renewals work.
How a Consumer Proposal Affects Your Mortgage Renewal
What Is a Consumer Proposal?
A consumer proposal is a way to deal with debt when payments have become difficult to manage. It allows you to make a new payment plan with your creditors, often paying back only a portion of what you owe, while stopping collection calls and giving you a path toward becoming debt-free.
How it Impacts Your Mortgage Renewal
A consumer proposal shows up on your credit report, and lenders can see it when they take a look at your file. That’s what makes many homeowners nervous heading into renewal season.
Your current lender may be more likely to renew your mortgage if you have kept your payments current, since they already have a history with you. However, renewal decisions are still up to the lender and depend on your overall financial situation.
The trade-off usually comes with pricing. You may not qualify for the same rates or discounts offered to borrowers with stronger credit profiles.
Renewal vs. Switch: Why the Difference Matters
Renewing with the lender you already have is one thing, but moving your mortgage to a brand new lender is another. The rules and expectations shift depending on which path you take.
Stay with Your Current Lender
Sticking with your current lender is often the simplest path while you rebuild your credit. Since your current lender already has your mortgage history, the process may be simpler than applying with a new lender.
Timing is important when considering staying with your current lender. We often recommend starting renewal talks about 4 to 6 months early so you have room to sort out the details without feeling rushed.
Switch to a New Lender
Switching often means you’ll have to go through a more in-depth approval process. A new lender doesn’t know you, so they may dig deeper into your finances before they say yes.
Many new lenders want to see a completed proposal and rebuilt credit before they’ll take you on. Alternative lenders can sometimes offer more flexibility if your file doesn’t fit the usual situation.
What Lenders Look At During Renewal
Lenders want to see that you can handle your mortgage payments going forward. Your payment history tells a big part of that story, so a consistent record of payment is important. They may also look at the wider picture of your finances, including your income and what other debt you may have.
Here are a few factors a lender may consider:
- On-time mortgage payments and current property taxes
- Your debt-to-income ratio and steady income
- Home equity and your progress rebuilding credit
The more equity you’ve built in your home, the more comfortable a lender will likely feel.
Steps to Renew Your Mortgage in a Consumer Proposal
A little preparation can be very helpful when it comes to renewal. Our team may recommend a few basic steps when it comes to mortgage renewal, depending on your situation. This could include:
- Consider rebuilding your credit with tools like a secured credit card, while continuing to make all payments on time
- Gathering proof of your financial progress, like bank statements and proposal payment records
- Working with mortgage brokers in Calgary who understand proposal files
Stay Flexible on Terms
When it comes to mortgage terms, being flexible can open more doors while you rebuild your credit. We may talk to you about considering some of the following options if it makes sense for your situation:
- Shorter mortgage terms
- Accept a higher rate temporarily while you rebuild
- Choose products that support your credit recovery
What to Do If Your Renewal Is Declined
A declined renewal feels discouraging, but it doesn’t mean you’re out of options. Our team is here to help you work through your next steps. We can help you ask about options like extending your amortization to reduce monthly payments or choosing a shorter mortgage term while you rebuild your financial profile. It may also be worth exploring alternative or private lender options. Either way, it’s a good idea to review your budget with a licensed trustee, who can help you determine what works for your specific situation.
Contact Us
Renewing your mortgage during a consumer proposal takes patience, but you don’t have to figure it out alone. Our team at Mortgage Connection can walk you through your options with clear, straightforward answers. Reach out today to talk through your renewal and take the next step forward.
