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For many Ontarians, keeping up with debt payments can feel like an uphill battle—especially with high-interest credit cards, personal loans, or missed bills piling up. If you’re falling behind and looking for relief, you might be wondering whether a consumer proposal is the right option. But what happens to your mortgage if you file a proposal? Can you still keep your home, renew your mortgage, or even get approved for a new one down the road?

Let's explore how consumer proposals work, how they differ from bankruptcy, what they mean for your current mortgage and your ability to get financing in the future—and how they compare to debt consolidation using your home equity.

Homeowners: Consumer Proposal vs. Bankruptcy

A consumer proposal is a legally binding agreement between you and your creditors. It allows you to settle your debts for less than what you owe, with one fixed monthly payment, usually over a period of up to 5 years. You make this offer through a licensed insolvency trustee (LIT), who negotiates with your creditors on your behalf.

Compared to bankruptcy, a consumer proposal is much less severe—especially when it comes to your home.

Here’s the difference:

In bankruptcy, your non-exempt assets (including equity in your home beyond a certain limit) can be seized and sold to repay your creditors. This means you risk losing your home if there’s significant equity in it.

In a consumer proposal, you keep your home as long as you stay current on your mortgage payments and property taxes. The proposal only deals with your unsecured debts—like credit cards, lines of credit, payday loans, and personal loans.

So, if you’re a homeowner who’s struggling with unsecured debt but wants to keep your house, a consumer proposal is often seen as a safer option than filing for bankruptcy.

What About Debt Consolidation with Home Equity?

Before committing to a consumer proposal, it’s important to ask: Is there another way to deal with my debt without damaging my credit long-term?

If you’re a homeowner with at least 20% equity in your property, a better option may be to consolidate your debts using a home equity loan, second mortgage, or home equity line of credit (HELOC).

These options allow you to pay off high-interest unsecured debts using your home’s equity. Instead of negotiating to settle your debts for less (which hurts your credit), you pay them off in full—but at a much lower interest rate than credit cards or payday loans.

This strategy can:

Protect your credit score

Avoid insolvency filings

Simplify your finances with one affordable payment

Preserve future mortgage approval options

A mortgage broker can assess whether you qualify for a home equity solution, compare it to a proposal, and help you make an informed choice.

Impact of Consumer Proposal on Your Credit Score

This is a big concern for many people—and for good reason.

In Ontario, once your consumer proposal is filed, it stays on your credit report for up to 6 years from the date it was filed, or 3 years after it’s fully paid off, whichever comes first.

Here’s an example:

You file a proposal in January 2023

You complete it in January 2026

It will fall off your credit report in January 2029 (3 years after completion)

During that time, it can significantly affect your ability to qualify for credit—including mortgages.

However, if you pay off your proposal early, the 3-year countdown begins sooner. This is one of the reasons people try to complete their consumer proposal faster—so they can start rebuilding their credit and borrowing power sooner.

Impact of Consumer Proposal on Borrowing Power

When you file a consumer proposal, all your creditors are notified, and your accounts are flagged with a “proposal” status. This tells future lenders that you negotiated to pay less than the full balance. Your credit score will drop significantly—often by 100 to 200 points, depending on your history.

In most cases, your credit score falls into the low 500s or below, and stays there until the proposal is fully paid off and you start rebuilding.

Because of this, most major lenders (like banks and A lenders) will consider you too high-risk for new loans, credit cards, or mortgages—at least until the proposal is complete and your score starts recovering.

That said, not all hope is lost. There are B lenders and private mortgage lenders who will consider working with you during or shortly after a proposal—but you’ll likely face higher interest rates and stricter terms.

Does a Consumer Proposal Affect Your Mortgage?

This is where many people start to panic—but the good news is, in most cases, your existing mortgage is not affected when you file a consumer proposal.

Why? Because your mortgage is a secured debt, and consumer proposals only deal with unsecured debts. As long as you continue making your mortgage payments on time and stay up to date on your property taxes, your lender will usually allow you to keep your mortgage without interruption.

If you need to renew your mortgage during your proposal, your current lender may be hesitant to offer you the best rate, or they might require you to switch to a higher-risk product.

Any late payments on your mortgage or other bills after the proposal is filed can make the situation worse.

So while your existing mortgage isn’t directly included in the proposal, how you manage it during and after the process still matters a lot.

Can You Get a Mortgage in a Consumer Proposal?

In short: it’s very difficult, but not impossible.

While you’re actively in a consumer proposal—meaning you’re still making monthly payments on it—most major lenders won’t approve you for a new mortgage. That includes banks and A lenders, who typically require a clean credit history and a credit score well above 600.

But there are exceptions. Some alternative lenders (B lenders) and private mortgage lenders specialize in helping borrowers with bruised credit or ongoing consumer proposals. However, there are a few trade-offs:

You’ll likely pay higher interest rates

You may need a larger down payment—sometimes 20% to 30% of the home’s value

In other words, while you can get a mortgage during a proposal, it will cost more and come with tighter conditions.

Can You Get a Mortgage After a Consumer Proposal?

Yes—you absolutely can. In fact, many Canadians get back into the mortgage market after completing their proposal. The key is how you rebuild your credit and financial profile after it’s over.

Once your proposal is fully paid off, you’ll receive a Certificate of Full Performance. This is your official proof that the agreement has been completed. From this point on, you can begin applying for new credit and working your way back toward mortgage eligibility.

Here’s what lenders will look for when you apply for a mortgage post-proposal:

Your current credit score (aim for 620 or higher for B lenders, and 680+ for A lenders)

A solid 2-year history of on-time payments on credit cards, loans, or car financing

Stable employment and income

A clean record—no new collections, missed payments, or judgments

A decent down payment (minimum 5%–20%, depending on the lender)

If you’ve taken the time to rebuild responsibly, you may be able to qualify for a B lender mortgage within a year or two of finishing your proposal. For A lenders like banks, you may need to wait a bit longer—especially until the proposal drops off your credit report completely.

Waiting Until the Proposal Is Off Your Credit Report

You don't necessarily need to wait.

As mentioned earlier, a consumer proposal stays on your credit report for 3 years after it’s completed or 6 years from the date it was filed, whichever comes first. But some lenders, especially B lenders and private lenders, are willing to approve you before it disappears—if the rest of your profile is strong.

That said, the longer it’s been since the proposal, the better your chances. Many people wait 1–2 years after completion to apply for a mortgage, because that’s enough time to:

Re-establish credit

Build a track record of on-time payments

Save for a down payment

Show stability in your income and finances

So while you don’t have to wait until the proposal is gone from your report, it helps to give yourself time to recover and strengthen your application.

Consolidate Debt with Equity vs. Consumer Proposal

Now that we’ve looked at how a proposal affects your mortgage, it’s worth asking: Would it have been better to consolidate the debt using home equity instead?

Let’s break it down.

Consumer Proposal

Lets you settle unsecured debts for less than you owe

Stops collection calls and wage garnishments

Hurts your credit score and stays on your report for up to 6 years

Harder to get approved for a mortgage or refinance afterward

Doesn’t affect your mortgage directly, but limits future borrowing

Debt Consolidation with Home Equity

Lets you pay off all your debts in full, at a lower interest rate

Doesn’t hurt your credit—in fact, usually helps improve it

Simplifies your payments into one monthly loan or line of credit

Keeps you in control of your finances (no trustee involvement)

Gives you better chances at qualifying for future loans or mortgages

If you own a home and have enough equity, using your home to consolidate debt is usually the more flexible, credit-friendly option. You avoid the long-term impact of insolvency, maintain access to lenders, and can still work toward bigger goals like buying a second property or refinancing down the road.

When Is a Consumer Proposal the Better Option?

There are definitely cases where a consumer proposal makes more sense—especially if:

You don’t own a home or don’t have enough equity to consolidate your debts

Your equity isn’t enough to support a consolidation loan

In those situations, a consumer proposal gives you a chance to reset. It’s not the end of your financial future—it’s just a new chapter, and one that can lead to recovery with the right plan.

Will a Consumer Proposal Affect Your Mortgage?

Filing a consumer proposal doesn’t automatically ruin your chances of owning or keeping a home in Ontario—but it does change the path. If you already have a mortgage, you can usually keep it as long as you stay current. But if you want to buy or refinance later, you’ll need to rebuild your credit and work with the right lenders.

For homeowners with equity, consolidating debt through a home equity loan or second mortgage can be a much more flexible option—one that avoids the long-term credit impact and keeps future mortgage options wide open.

Whatever path you choose, don’t go it alone. Talk to a licensed insolvency trustee or a mortgage broker you trust. They’ll help you understand the full picture—and guide you toward a solution that protects your home, your credit, and your future.