Getting a Mortgage After a Consumer Proposal in Canada

Completing a consumer proposal is a major financial accomplishment. It marks the end of a difficult chapter and the beginning of a fresh start. As you regain your financial footing, it’s natural to start thinking about future goals, and for many Canadians, that means homeownership. This often leads to the big, looming question: "Is it even possible to get a mortgage after a consumer proposal?"

The answer is a resounding yes. While a consumer proposal significantly impacts your credit, it is not a life sentence that bars you from owning a home. It does, however, change the path you'll need to take. This guide will provide a clear and comprehensive overview of how to get approved for a mortgage, whether you are purchasing a new property or refinancing your existing home. We will cover:

The critical importance of your discharge certificate.

The timeline you need to follow after your proposal is complete.

The central role that B Lenders play in these situations.

An actionable plan for rebuilding your credit effectively.

Navigating the mortgage landscape after a consumer proposal requires specialized knowledge. Our team is experienced in complex files and second chances. We believe your past financial challenges shouldn't define your future, and our role is to show you the clear, strategic path back to homeownership.

How a Consumer Proposal Affects Your Credit

Before exploring the solutions, it’s important to understand how a consumer proposal is viewed by the financial world. A consumer proposal is a formal, legal agreement administered by a Licensed Insolvency Trustee to repay a portion of your debts to your creditors over a set period (up to five years).

While it is a responsible alternative to bankruptcy, it has a significant and immediate negative impact on your credit score. When you enter a proposal, Canada’s two credit bureaus, Equifax and TransUnion, will assign an "R7" rating to the accounts included. This rating signals to lenders that you have made a formal arrangement to settle your debts.

This R7 rating will remain on your credit report for three years after your final payment is made and you are officially discharged. This three-year window is the most critical period for rebuilding and demonstrating your renewed creditworthiness.

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The First Step: Your Discharge Certificate

The single most important document in this entire process is your Discharge Certificate. This is the legal document issued by your trustee that proves you have fulfilled all the terms of your proposal and made all your payments.

Without this certificate, no lender will consider your application.

It is the official starting pistol for your financial recovery. Before you even think about applying for a mortgage, you must have this document in hand. It’s also crucial to ensure that your credit reports from both Equifax and TransUnion have been updated to reflect that your proposal has been paid in full. Sometimes there are administrative delays, so it's wise to pull your own reports to confirm they are accurate.

The Lender Landscape: Who Will Give You a Mortgage?

After a consumer proposal, the front door of your local big bank is likely closed, at least for a while. You need to turn your attention to the alternative lending market.

Why "A" Lenders (The Big Banks) Say No

The major Canadian banks are what we call "A" Lenders. Their business model is built on volume and standardized, low-risk applications. Their automated systems are typically programmed to automatically decline any applicant who has a recent consumer proposal on their record. Most "A" Lenders have a strict policy requiring a minimum of two years of perfectly re-established credit history after the proposal has been discharged from your credit report (which is three years after completion). In practice, this can mean a waiting period of up to five years after your final payment.

The Solution: "B" Lenders

This is where the expertise of a mortgage broker becomes essential. We work with a wide range of "B" Lenders (also known as alternative mortgage lenders) who specialize in helping clients that don't fit into the traditional bank's box.

B Lenders have a more flexible, common-sense approach to underwriting. They are willing to look past the credit score and listen to the story behind your financial challenges. They understand that good people can have bad things happen, and their primary focus is on your financial health today. They will want to see a strong history of rebuilding credit and a solid down payment, but they will not make you wait years to get back into the market.

The Two Scenarios: Purchasing vs. Refinancing

The path to getting a mortgage after a consumer proposal looks slightly different depending on whether you are buying a home or refinancing one you already own.

Getting a Mortgage for a New Home Purchase

If you are looking to buy a home after your proposal, B Lenders will be your primary option. Here’s what you need to prepare for:

A Significant Down Payment: Because you are considered a higher-risk borrower, you will not be able to get an insured mortgage. This means you will need a minimum down payment of 20% of the purchase price. This down payment must come from your own resources (savings), a gift from an immediate family member, or the sale of another asset.

A Solid History of Re-Established Credit: This is crucial. A B Lender will want to see that you have taken concrete steps to rebuild your credit since being discharged. This typically means having at least two new credit products (like two secured credit cards or one card and a small car loan) with at least 12, and ideally 24, months of perfect payment history.

A Clear Story: We help you present your application in a way that clearly explains the circumstances that led to the proposal and demonstrates the stability and responsible financial habits you have established since.

Getting a Mortgage to Refinance Your Existing Home

For existing homeowners, refinancing after a consumer proposal can be a powerful strategic move. You might refinance with a B lender to:

Pay off the consumer proposal early with a new mortgage.

Consolidate other lingering debts into a single, lower payment.

Access equity for renovations or other needs.

The process is similar to a purchase, but with one key advantage:

Your Equity is Your Down Payment: The 20% equity required by a B Lender is already in your home. This can make qualifying for a refinance easier than for a new purchase. For example, if your home is worth $800,000 and your current mortgage is $500,000, you have $300,000 in equity (or 37.5%), which is more than enough to satisfy a B Lender’s requirements.

The Same Rules Apply: You will still need your Discharge Certificate and a strong history of re-established credit for at least 12-24 months after the discharge date.

A Step-by-Step Guide to Rebuilding Credit

Getting approved for a mortgage after a consumer proposal is an active process. You can’t simply wait for your credit score to magically repair itself. You need a deliberate plan.

Step 1: Get Your Discharge Certificate. This is your starting line.

Step 2: Pull Your Credit Reports. Immediately get copies of your reports from both Equifax and TransUnion. Review them carefully to ensure all debts included in the proposal are reported as "Included in Proposal" and show a zero balance. Also, confirm the discharge date is listed correctly.

Step 3: Open Two New Credit Facilities. This is the most important step in actively rebuilding. You need to show lenders that you can be trusted with new credit. The goal is to have at least two active credit accounts (or "tradelines") reporting to your bureau. The easiest way to do this is with:

Secured Credit Cards: You provide a security deposit (e.g., $500), and the bank gives you a credit card with that same limit. Use it for small, regular purchases (like gas or groceries) and—this is critical—pay the balance in full every single month.

A Small RRSP Loan or Car Loan: A small, manageable installment loan can also help show that you can handle regular, fixed payments.

Step 4: Be Patient and Perfect. Consistently manage these new credit products perfectly for at least 12-24 months after your discharge. Do not miss a payment, and keep the balances on your credit cards below 30% of their limit. This consistent, positive history is what B Lenders are looking for.

Your Second Chance at Homeownership

A consumer proposal is not the end of your homeownership dream; it is simply a detour. It requires patience, discipline, and a clear strategy, but getting a mortgage is an entirely achievable goal. The key is to be proactive about rebuilding your credit as soon as you are discharged and to work with professionals who specialize in these situations.

While the big banks may not be an option in the short term, the B Lending space is designed for Canadians who need a second chance. The role of a mortgage broker is to be your guide and advocate through this process. The team at 360Lending can create a customized plan for you, connect you with the right lenders who understand your story, and help you structure a mortgage that gets you back into the housing market. More importantly, we’ll work with you on a long-term plan to get you back to an "A" lender when it’s time to renew.

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