Can You Get a Mortgage with a Consumer Proposal?

November 5, 2025 | Posted by: Matt Broom-Hall

Can You Get a Mortgage with a Consumer Proposal?

Say Hello to Second Chances , Where Strategic Planning Turns Financial Recovery Into Homeownership Success.

Getting a mortgage while in a consumer proposal can feel like an uphill battle, but here's the truth: it's absolutely possible with the right strategy and timing. The key isn't just knowing whether you can qualify , it's understanding exactly when, how, and with which lenders to maximize your chances of approval.

As Alberta's trusted mortgage experts, I'm taking you behind the scenes of consumer proposal mortgages, giving you the insider knowledge and proven strategies to navigate this challenging but conquerable path to homeownership.

What Is a Consumer Proposal?

A consumer proposal is a legally binding arrangement between you and your creditors, designed as an alternative to bankruptcy. Think of it as a negotiated settlement where you agree to pay back a portion of your debts , typically 20% to 50% of what you owe , over a maximum of five years.

Here's how it works: You work with a licensed insolvency trustee to develop a proposal that your creditors must vote on. If accepted, you make monthly payments according to the agreed terms, and once completed, the remaining debt is forgiven. It's a lifeline for those drowning in debt, but it comes with credit consequences that directly impact your mortgage options.

The Credit Impact Reality Check

Let's be direct about this: a consumer proposal will negatively impact your credit score. When you file a consumer proposal, it appears on your credit report as an R7 rating, which signals to lenders that you've entered into a special payment arrangement with creditors.

This rating stays on your credit report for three years after you complete the proposal, but here's what most people don't realize , the impact on your mortgage eligibility is more about timing and strategy than permanent disqualification.

Traditional lenders view consumer proposals as a red flag because they indicate past financial difficulties. However, they also recognize that choosing a consumer proposal over bankruptcy shows financial responsibility and a commitment to repaying debts.

Mortgage Eligibility: It's All About Timing

The Two-Year Rule

Most traditional lenders and mortgage default insurers, including CMHC, require a minimum of two years to pass after completing your consumer proposal before approving a new mortgage. This isn't arbitrary , it's about demonstrating sustained financial responsibility and rebuilt creditworthiness.

But here's where strategy comes into play: those two years aren't just waiting time; they're rebuilding time. During this period, you need to actively reconstruct your credit profile using what we call the 'Rule of Twos.'

The Rule of Twos Explained

To qualify with AAA lenders after your consumer proposal, you need:

• 2 different types of credit (like a credit card and a line of credit)
• Limits of at least $2,000 on each account
• 2 years of clean payment history on these accounts

This means if your consumer proposal took five years to complete, you're looking at seven years total before top-tier lenders will consider your application: five years to finish the proposal plus two years of credit rebuilding.

Renewing vs. Refinancing: Know the Difference

If you already own a home and enter a consumer proposal, understanding the difference between renewing and refinancing your mortgage is crucial.

Mortgage Renewal

Good news here: renewing your existing mortgage while in a consumer proposal is typically straightforward. As long as your mortgage payments are current and you're not requesting any changes to the terms, most lenders will automatically renew your mortgage. Your existing mortgage is a secured debt and won't be affected by your consumer proposal as long as you keep making payments.

Refinancing Challenges

Refinancing is a different story entirely. This requires a new credit application and will be subject to your current credit rating. However, if you have significant equity in your home (typically more than 30%), refinancing through alternative lenders might actually be a smart strategy to pay out your consumer proposal early.

Here's how this works: You can refinance up to 80% of your home's value through an alternative lender. If this provides enough funds to pay off your consumer proposal, you can discharge it immediately rather than continuing payments for years. Yes, you'll pay higher rates and fees (typically 1% setup fee), but you'll also start rebuilding your credit sooner.

Getting a New Mortgage: Your Options

Traditional Lenders

Major banks and credit unions typically won't approve new mortgages until that two-year post-completion period has passed. But when that time comes, having done your homework with credit rebuilding, stable income, and a substantial down payment makes approval much more likely.

Alternative Lenders

Alternative lenders operate with more flexibility but at a cost. They may approve mortgages even during your consumer proposal, provided you have significant property equity. These lenders typically require:

• Down payments of 20% or more
• Higher interest rates (often 2-4% above prime)
• Additional fees and setup costs
• Proof of stable income

The question isn't whether alternative lending is available : it's whether the higher costs justify the earlier access to homeownership.

Your Action Plan for Mortgage Approval

Immediate Steps

Start rebuilding your credit immediately after completing your consumer proposal. Apply for a secured credit card if necessary, and focus on making every payment on time. Even small, consistent payments build positive credit history.

The 20% Down Payment Strategy

Saving for a 20% down payment eliminates the need for mortgage default insurance, giving you access to more lenders and better terms. This single factor can be the difference between approval and rejection.

Income Stability

Lenders want to see consistent, reliable income. If you're self-employed or have variable income, consider working with specialized programs like our Alberta self-employed mortgage solutions.

Consider a Co-Applicant

Adding a spouse or family member with strong credit to your application can significantly improve your approval chances. A co-applicant provides additional income and creditworthiness to offset the consumer proposal history.

The Strategic Approach

Here's what separates successful mortgage applications from rejected ones: strategy over hope. Don't just wait out the two-year period : use it actively. Monitor your credit report, dispute any errors, and build positive payment history consistently.

Consider working with a mortgage broker who understands consumer proposal scenarios. We have access to lenders specifically equipped to work with your situation, and we know which lenders are most flexible with timing and requirements.

Your Next Steps

Getting a mortgage after a consumer proposal isn't just possible : it's a gateway to rebuilding your financial future. The key is approaching it strategically, with realistic timelines and expert guidance.

Whether you're just entering a consumer proposal or approaching that crucial two-year mark, having the right mortgage strategy makes all the difference. At Hello Mortgage, we specialize in helping Albertans navigate complex mortgage scenarios, including consumer proposals.

Ready to explore your options? Let's discuss your specific situation and create a personalized plan to get you back into homeownership. Because everyone deserves a second chance at their financial dreams : and we're here to make sure you get yours.

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