Can You Qualify for a Mortgage or Refinance After a Bankruptcy or Consumer Proposal?

Many people think that once they file for bankruptcy or a consumer proposal they will never be able to get credit cards or a mortgage again or that they will have to wait several years before they can apply for and qualify for credit products again. Not only is that assumption wrong, but you might qualify for credit such as credit cards, car loans, a mortgage or home refinance, or student loans, or other tradelines much sooner than you might guess.

How Soon Can You Get a Credit Card, Buy a Home, Get a Car Loan, or Refinance Your Mortgage After a Consumer Proposal or Bankruptcy?

Most people to get discharged from bankruptcy or completely pay off their consumer proposal before asking this question, but in many cases you might be able to get a new purchase mortgage or mortgage refinance, credit card, or other loan while you are still in the middle of a bankruptcy or consumer proposal.

Did you know that certain lending institutions will allow you to get a prepaid credit card while you are waiting to pay off your consumer proposal or bankruptcy debts? In the case of a mortgage or home refinance there are many B-lending institutions or private mortgage lenders who will be willing to help you also. In the event of a mortgage refinance or second mortgage, if you have enough equity built up in your property, you can get the extra cash needed to completely pay off your consumer proposal and bankruptcy debts.

Although credit cards, car loans, and mortgages for those who are either still undergoing the process, or those who have just finished paying off their proposal or recently discharged from bankruptcy come at higher interest rates, this might be a viable option to help you start rebuilding your credit. By rebuilding your credit quicker, you will be able to qualify for a wider variety of credit products at lower interest rates and better terms.

To be clear, I do not recommend getting into more debt or high mortgages if you have not yet been discharged from your bankruptcy debts or have not yet paid off your consumer proposal, unless you have very specific reasons that make good financial sense.

Why You Should Pay Off Your Consumer Proposal as Early as Possible?

The urge to pay off your debts faster should be a top priority, especially since most consumers have more debt than they can comfortably afford. When it comes to paying off your consumer proposal early, here are 3 great reasons to do so as soon as possible:

1. You need to renew your existing mortgage soon: If you currently have a mortgage with a lender with which you have a credit card, car loan, or another debt product that you are including in your bankruptcy or consumer proposal, than you will likely not be able to renew your mortgage with them once your term is up. This can leave you in a bad spot since you risk losing your home unless you either pay out your mortgage entirely or find another lender that is willing to give you a mortgage for the full amount. Since a consumer proposal remains on your credit record for either 3 years form the date that you pay it off, or 6 years from the date that you file, the sooner you pay it off, the sooner it is removed from your record, and the easier you will find it to qualify for a mortgage to replace your existing one.
2. Improve, rebuild, and maintain a high credit score: If you’ve ever filed for a consumer proposal or bankruptcy, you know that your credit score takes a serious beating. The sooner you pay off your bad debts, the sooner you will be able to start re-establishing a credit score that will open doors to more attainable credit at lower and more reasonable interest rates.
3. Improve your cashflow: If you are not yet discharged from your bankruptcy due to outstanding debts, or if you still owe payments on your consumer proposal, you are most likely feeling the pinch of having little to none available cashflow. If this is the case, then by paying off your bad debts quicker, you will be able to feel some relief. If you take out a 2nd mortgage or refinance your home for the purpose of consolidating debt or repaying your consumer proposal, you are likely to have additional cash remaining to help you feel some more financial freedom. Budget wisely for the next little while and you will be on your way to healthier credit and a brighter financial future.

We are all human and we all make mistakes. Sometimes people need to file for bankruptcy or a consumer proposal for no fault of their own. Life circumstances, illnesses, family situations, along with many other factors that are unexpected and out of our control can put us in financial disarray. At the end of the day, your goal should always be to get back on your feet and improve your situation.

A bankruptcy or consumer proposal can be the second chance that you need. However, it is even more important to continuously strive to improve your credit score and rebuild a positive credit history so that you will be able to qualify for the best possible credit products, such as low interest credit cards, affordable car loans, or low interest rate mortgage products in the future.

Call or text us today at 416-674-6222 or toll free at 1-800-673-2230, or email us at [email protected] to speak with an experienced licensed mortgage broker or agent and find out how you can qualify for a mortgage refinance or home purchase mortgage today.