Will A Consumer Proposal Affect My Mortgage At Renewal?
Unique financial situations come into play for many people and choosing a consumer proposal is something that some Canadians turn to when debts and other bills put them at risk of loosing their home. I have personally witnessed clients that have had great success going through these debt consolidation programs. But there are things to be aware of and debt owed to the same institution that holds your mortgage is something you should take great consideration prior to including this into your restructuring.
I know how difficult it is as a mortgage broker to try to think of all aspects of a transaction, current and in the future and the affects it may have on my clients. The same thing I am sure that credit counselors consider when structuring a consumer proposal.
One thing I see often is client calling me up one or two years after they have entered into a consumer proposal. Sometimes they ask, “How will the consumer proposal affect my chances of the bank renewing my mortgage?” Other times they are in a panic and tell me “My bank will not renew my mortgage due to my consumer proposal.”
I am sure there are many things to considered by a consumer proposal counselor when doing up a consumer proposal like, reducing as much debt for the client, getting the best payment structure for the client to maintain a successful repayment program. The one thing I see as a mortgage broker dealing with renewals or refinancing a mortgage for clients that have went into a consumer proposal is the debts owed to the same bank that holds your mortgage payment may cause issues at the time of renewal.
It can be more costly to have to refinance your existing mortgage if your bank will not renew your mortgage due to you walking away from a small credit card or unsecured LOC. Prior to including these debts, I would have a long talk with the branch that holds that debt to get some assurance that it will not affect the mortgage renewal.
I have seen clients go through with the proposal only to have the bank not renew 3 years later and they end up having no options available to refinance and are forced to sell. If you considered a consumer proposal as a way to save your home make sure you keep your current mortgage lender happy and discuss in length what debt you should or should not include.