Will a Consumer Proposal Affect My Mortgage Renewal?
Matrix Mortgage Global – Will a Consumer Proposal Affect My Mortgage Renewal?
Have you ever wondered whether that consumer proposal you’re considering might affect you if you mortgage is coming up for renewal?
First let’s talk about what a consumer proposal is and how it works. In Canada if you find yourself in a situation where your bills exceed your capacity to pay them, there are options to help get you back on your feet. Each with its own benefits and detriments. Not the least of which is the hit to your credit rating. However, if you are in a situation where you can’t pay your bills, and on time, your credit rating will inevitably be affected anyway so taking proactive steps to build a better financial future will eventually pay off. A consumer proposal is an alternative to bankruptcy where in, instead of not paying back any of your debts you pay back a percentage of what you owe. This leaves you in a slightly better credit situation than filing for bankruptcy does.
When you file for bankruptcy you are saying I can’t pay anyone anything anytime in the foreseeable future, where a Consumer Proposal is saying I can’t pay it all but I want to do what I can. It’s an arrangement that’s negotiated with your creditors on your behalf through a Consumer Proposal administrator who must also be a Licensed Insolvency Trustee. How much you pay and for how long is based on a variety of factors, but your ability to make the payments is taken into consideration during this process. If more than half of said creditors agree to the settlement then a legally binding agreement is put in place to provide you with immediate protection from said debt collectors. So basically, you agree to pay what you can and your debtors agree to forgive the rest. Once you have satisfied the terms of your proposal (i.e. paid it off in full), it will remain on your credit record for three years. Unlike a bankruptcy which remains for six years.
What does this mean for your mortgage renewal? The good news, in most cases, nothing. Provided of course that you have made all of your mortgage payments in the past and you can show the mortgage lender that you will be able to continue to do so in the future. A consumer proposal can however, make it more difficult to switch mortgage lenders and it will also make it difficult to get a favorable interest rate. Your best bet in this situation is to stick with your current lender and make sure that you are making and will continue to make your mortgage payments on time. If for some reason, you can’t stay with your current lender, you should get in touch with your mortgage broker as soon as possible.
If you’ve filed for consumer proposal contact us today at 1-877-369-5478 to see how your interest rates will be impacted and how we can help prepare you for your upcoming renewal.