Short AnswerLegally there is nothing that would not allow you to buy a house while in a consumer proposal, however you may have difficulty as you won’t have the credit rating to be approved for the mortgage.
A Bit More DetailMost creditors will not approve you for a mortgage while you are in a proposal. You can renew a mortgage though, while in a proposal, but your interest rate may be affected. We often advise clients to renew their mortgages first before filing one. During the proposal you can save towards the down payment and then apply for mortgage approval afterwards. If you have included a mortgage shortfall in a proposal or bankruptcy you may not qualify for further CMHC insurance in which case you will need a bigger deposit. Often, consumers are told by banks and other financial institutions that they can’t borrow money while in an undischarged bankruptcy or in a consumer proposal. But that’s not entirely true. Any lender can loan you money while you are in a consumer proposal if they want to. In fact, if you are midway through a proposal and your home value has gone up, refinancing to pay off your consumer proposal is a great way to reestablish your credit faster because a proposal comes off of your credit report three years from when it is paid in full. Ultimately it depends on the lender — some lenders will be unwilling to take the risk. If you want to find a lender who will help refinance your house after filing for a consumer proposal, you have to:
- Source lenders who promote loans for undischarged bankruptcies and people in consumer proposals. If it isn’t stated on their website, call their office and ask.
- Expect that while you are in a consumer proposal a lender will likely want some security collateral like a home or vehicle. Make sure to let the lender know what assets you have.
- Gather information about your security, value, and what is owed, if anything, so you can have an in-depth conversation with a potential lender.
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