Mortgage After a Consumer Proposal in Ontario: Your Real Timeline
Quick answer: Yes, many Ontario borrowers get a mortgage after a consumer proposal. Most banks and default insurers look for about two years of rebuilt credit after your proposal is fully paid and discharged. Before then, alternative (B) or private lenders may help, especially if you own a home with good equity, at higher cost. Lender and insurer rules vary.
Most people who've been through a consumer proposal assume owning a home is off the table. It isn't. It's on a different timeline, and that timeline is often shorter than people think if you rebuild the right way.
Here's what I tell every client who walks in after a proposal: the proposal is in the past. What matters now is what you've built since.
What is a consumer proposal?
A consumer proposal is a legally binding agreement with your creditors, set up through a Licensed Insolvency Trustee. Instead of declaring bankruptcy, you agree to repay part of what you owe, or to repay over a longer period, in a way you can manage.
It's a legitimate way out of debt. The trade-off is that it shows up on your credit report, and lenders will see it. That's not the same as a permanent no.
How a proposal affects your mortgage options
Banks and insured mortgages. Most A lenders, and the default insurers (CMHC, Sagen and Canada Guaranty), generally want to see about two years of clean, re-established credit after your proposal is discharged. That window is how they confirm your habits have changed.
Alternative (B) lenders. They have more flexibility. In some cases they'll refinance a home while a proposal is still active, if there's enough equity to pay the proposal out in full as part of the refinance. That usually means having well over 20% equity, since most refinances are capped at 80% of the home's value.
Private lenders. They focus mainly on your equity and a clear exit plan. They cost more and are short-term, so we only suggest one when there's a realistic plan to move back to a regular lender. See how private mortgages work.
Think of B and private lending as a bridge, not a destination.
The "rule of twos"
This is the rebuilding guideline many lenders and insurers use after a proposal:
2 types of credit opened after the proposal, for example a credit card and a car loan
Each with a limit of about $2,000 or more
2 years of on-time payments on both
It sounds simple, but many people rebuild the wrong way, with one low-limit card, and then wonder why lenders still hesitate two years later. Plan your rebuild around this from day one. Exact requirements vary by lender and insurer, so we confirm them for your file.
Can you renew your mortgage during a consumer proposal?
Usually, yes. Renewing with your current lender normally doesn't need a new credit application, so as long as your mortgage payments have stayed current, the renewal usually goes ahead. See mortgage renewal.
Refinancing is different. It's a new application, and your proposal will affect it. During an active proposal, refinancing is usually only possible with alternative or private lenders, at higher rates, and lender and broker fees often apply. We disclose every fee in writing before you sign.
If you have strong equity, a refinance to pay out the proposal can sometimes speed up your path to discharge and back to regular lenders. A second mortgage is another option in some cases. Run the numbers before deciding it isn't worth it.
Getting a new mortgage after your proposal
Once your proposal is discharged and you've rebuilt for about two years, your options open up. What helps most:
Follow the rule of twos. Two trade lines, about $2,000+ limits, two years of on-time payments.
Save toward 20% down if you can. With 20% or more down, you don't need default insurance, and lenders often have more flexibility. It also shows the lender you've rebuilt your finances.
Consider a co-applicant. A co-applicant with good credit and steady income can strengthen the file. Make sure both of you understand that a co-signer is fully responsible for the mortgage if payments stop, and get independent legal advice.
Keep every other payment spotless. Phone, car, cards, utilities: every on-time payment is evidence. Treat each one as if an underwriter will review it, because eventually one will.
A client story (Ontario)
Mark is a trades contractor in Oshawa. He completed a consumer proposal after a business downturn and came to us 18 months after discharge. He had one secured credit card with a $1,500 limit, which didn't meet the rule of twos.
We helped him add a second trade line, another credit card with a $1,000 limit, bringing him to two credit cards with $2,500 in combined limits. In his case, that was enough for the lender. We mapped out the six months of payment history he still needed and planned the application around that date.
About 25 months after discharge, Mark closed on a townhome in Whitby with a conventional A lender. Not a B lender, not a private mortgage. The proposal was in his past, and the plan let him prove it.
Key terms
Consumer proposal: a legally binding debt repayment agreement set up through a Licensed Insolvency Trustee, as an alternative to bankruptcy.
Discharge: the formal completion of a proposal. The rebuilding clock usually starts here.
Rule of twos: two trade lines, about $2,000+ limits, two years of on-time payments.
A lender: banks and credit unions with the strictest rules and usually the lowest rates.
B lender: alternative lenders with more flexible rules, higher rates and fees.
Default insurance (CMHC, Sagen, Canada Guaranty): required when you put less than 20% down.
Loan-to-value (LTV): your mortgage as a percentage of your home's value. 80% LTV means 20% equity.
Licensed Insolvency Trustee: the federally regulated professional who handles consumer proposals and bankruptcies.
Common questions
How long after a consumer proposal can I get a mortgage in Ontario?
With most banks, about two years after your proposal is fully discharged, with credit rebuilt along the rule of twos. If your proposal ran four years, that can mean about six years from the start. Plan your rebuild from day one. Some B lenders may consider you sooner.
Can I get a mortgage while my proposal is still active?
For a new purchase, it's very limited. For a refinance that uses your home's equity to pay out the proposal, sometimes, through B or private lenders, if there's enough equity. We look at each file individually.
My bank already declined me. Is that the end of it?
No. A decline is one lender's policy. We work with lenders that have different rules, and we'll tell you honestly what's realistic and what it would cost.
I don't qualify for a standard mortgage. What are my options?
Depending on your file: an alternative (B) lender, a private lender, a co-applicant, or waiting and rebuilding for a set period. We'll lay out the cost and timeline of each so you can choose.
Do I need 20% down after a consumer proposal?
Not always, but 20% or more removes default insurance from the picture and usually gives lenders more room. It's the stronger plan if you can get there.
Will I always pay higher rates after a proposal?
No. Once you've rebuilt for about two years after discharge, regular lenders are often an option again. The B lender bridge is meant to be temporary.
Can I renew my mortgage during a consumer proposal?
Usually, yes, if your mortgage payments have stayed current. Renewing with your current lender normally doesn't need a new credit application.
What if I only have one credit card since my proposal?
That's a gap. Add a second trade line (a car loan, a second card or a line of credit) and start the clock. I'd much rather hear from you 18 months before you want to buy than 30 days before.
Want to know how lenders read your credit file? See Will Shopping for a Mortgage Hurt My Credit?.
Here's the move
A consumer proposal is a chapter, not a life sentence. If you've been through one and want to know exactly where you stand and what your timeline looks like, let's map it out now. The earlier we plan, the cleaner the path to closing. Choice Financial Corp., FSRA Licensed Brokerage #13564.
