Getting a mortgage after a consumer proposal in Ontario
A consumer proposal solves one problem and creates another. Your unsecured debts are settled, the collection calls stop, and your payments are manageable. But the moment you ask about a mortgage, most banks stop returning your calls. If you are searching for a mortgage after a consumer proposal in Ontario, you have probably already run into that wall, or you can see it coming.
Here is the part most articles skip: your options depend less on the proposal itself and more on where you stand today. Are you still making proposal payments? Just finished? Two years out with rebuilt credit? And do you own a home with equity? Each position has a different path, and one of them, refinancing your home equity to pay out the proposal early, can shorten the whole timeline considerably.
This guide covers all of it: how a proposal affects your credit file, realistic approval timelines, the A, B, and private lender routes, the early payout strategy with a worked example, and the credit rebuilding steps that get you back to bank rates.
How a Consumer Proposal Affects Your Mortgage Options
A consumer proposal is a legally binding settlement with your unsecured creditors, filed through a Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act. You repay an agreed portion of what you owe, interest free, over a maximum of five years. Your mortgage is a secured debt, so it is not included in the proposal, but the filing still lands hard on your credit file.
Two things happen on the credit side:
- Your rating drops to R7. That is the code bureaus assign to accounts being repaid through a proposal or similar arrangement. Most lenders read it as a recent insolvency, whatever your score says.
- The proposal stays on your report for years. According to Equifax Canada, a consumer proposal is removed three years after you complete it, or six years after you file it, whichever comes first. Finish a five year proposal on schedule and it can sit on your file for the better part of six years from the day you signed.
If it feels like you are the only person dealing with this, the numbers say otherwise. The Office of the Superintendent of Bankruptcy reported about 140,000 consumer insolvency filings in Canada in 2025, and roughly 78 percent of them were consumer proposals rather than bankruptcies. Ontario alone accounted for about 52,800 filings, with proposals making up around 81 percent. Lenders see proposals every week, and an entire segment of the mortgage market has built its lending criteria around them.
Can You Get a Mortgage While Still in a Consumer Proposal?
Yes, in specific circumstances. It helps to separate three situations.
Keeping your existing mortgage. Your mortgage was never part of the proposal, so as long as your payments are current, you keep making them and you keep your home. At renewal, your existing lender will typically offer you a renewal without requalifying you, provided the account is in good standing. Switching to a new bank at renewal is a different story; that is a new application, and the proposal will surface.
Refinancing or adding a second mortgage during the proposal. Chartered banks, the A lenders, will almost never advance new money to someone in an active proposal. Some B lenders will consider it after a year or more of clean proposal payments, usually on the condition that the loan pays the proposal off in full. Private mortgage lenders in Ontario, including mortgage investment corporations, are the most flexible: they lend primarily against your home equity, and many will fund while a proposal is active, most often structuring the loan so the proposal is paid out from the proceeds at closing.
Buying a home during the proposal. This is the hardest path, but not a closed door. With a large down payment, typically 25 to 35 percent, and stable income, some private and equity lenders will fund a purchase while a proposal is active. Expect higher rates and a plan to refinance later.
One caution: proposal terms commonly require you to disclose your insolvency when borrowing over a threshold amount, and your trustee should know about any financing that touches the proposal. Involve the trustee early; a payout arranged through them is routine.
Refinancing to Pay Out Your Consumer Proposal Early
This is the strategy that gets one throwaway line in most guides, and it deserves a full section, because for Ontario homeowners it is often the fastest route back to a normal mortgage.
How an equity payout works
A consumer proposal can be paid off early in a single lump sum. There is no interest on proposal payments and no prepayment penalty; you are simply completing your obligation ahead of schedule. If you own a home with sufficient equity, you can raise that lump sum by refinancing your first mortgage or, more commonly, by adding a second mortgage in Ontario behind your existing first.
The sequence looks like this:
- A lender advances funds secured against your home equity.
- Your Licensed Insolvency Trustee receives the remaining proposal balance and files the paperwork.
- You receive a certificate of full performance, the document confirming the proposal is complete.
- The three year credit report clock starts from that completion date instead of years later.
That last point is the whole game. Because bureaus remove the proposal three years after completion, completing it in year two instead of year five can get the proposal off your credit report up to three years sooner, which moves up the date a bank will approve you by roughly the same amount.
A worked example
The numbers below are a hypothetical illustration, not a client file or an advertised offer.
Suppose an Ontario homeowner has a house worth $850,000 with a $460,000 first mortgage, about 54 percent loan to value. Eighteen months ago she filed a consumer proposal and still owes $28,000, payable at $665 per month for another 42 months.
She takes a $40,000 second mortgage at 10 percent, interest only, which covers the $28,000 payout plus legal, lender, and broker fees with a buffer. Her combined loan to value is still under 60 percent, comfortable territory for most private lenders. The carrying cost is about $333 per month, and the $665 proposal payment disappears, so her monthly cash flow actually improves by about $332 while the debt is retired years early.
More importantly, her proposal completes now, at the 18 month mark, instead of at month 60. The credit report clock ends around three years from today rather than more than six years from her filing date. If she rebuilds credit over the next 18 to 24 months, she can realistically refinance the second mortgage into a B lender product, then reach bank pricing years ahead of the wait-it-out schedule. Homeowners juggling other high interest balances sometimes fold those into the same transaction; that is the standard debt consolidation mortgage play.
When an early payout is not worth it
Honest caveats matter here. An equity payout makes less sense when:
- Your remaining balance is small and short. Paying $6,000 over eight months out of cash flow beats borrowing at private rates to clear it.
- You have little equity. If a payout pushes your combined loan to value above roughly 75 to 80 percent, pricing worsens and options thin out.
- There is no exit plan. A private second mortgage is a bridge, not a destination. If your income or credit habits will not support refinancing to a B or A lender within one to three years, the interest cost can outweigh the credit timeline benefit.
Run the arithmetic both ways, and have a broker or lender walk you through it before committing.
Buying a Home During or After a Consumer Proposal in Ontario
If you are renting and want to buy, the down payment does most of the talking.
With less than 20 percent down, your mortgage needs default insurance, and insurers and lenders generally want to see the proposal completed plus about two years of re-established credit before approving an insured application. Practically, that means the bank route reopens roughly two years after your certificate of full performance, assuming you have rebuilt credit in the meantime.
With 20 percent or more down, insurance is not required, and the timeline compresses. B lenders will often consider borrowers a day after completion, sometimes during a proposal with strong compensating factors, at rates modestly above bank pricing. Private lenders will go earlier still, typically wanting 25 to 35 percent down on a purchase.
Whatever the path, three things carry the most weight after an insolvency: the size of your down payment or equity, the stability of your income, and a clean payment record on everything since the day you filed. A single missed proposal payment or a fresh collection undoes months of progress.
The Three Lender Paths: A, B, and Private
For context on pricing, the Bank of Canada policy rate sits at 2.25 percent as of August 2026, and every lender tier prices up from that baseline according to risk. Here is how the three paths compare for proposal files. Ranges are market-typical, and any specific file can land outside them.
| A lenders (banks, credit unions) | B lenders (alternative banks, trusts) | Private lenders and MICs | |
|---|---|---|---|
| Earliest realistic timing | About 2 years after completion, with rebuilt credit | At or shortly after completion; sometimes during a proposal | During an active proposal, equity permitting |
| Typical down payment / equity | As little as 5 percent (insured) | Usually 20 percent or more | Usually 25 to 35 percent; combined LTV often capped near 75 to 80 percent |
| Documentation | Full income and credit qualification, stress test | Income verified, more flexible ratios | Equity-first; income and credit reviewed but secondary |
| Indicative pricing | Lowest available rates | Roughly 1 to 2 points above bank rates, plus a fee of about 1 percent | Commonly 8 to 12 percent, plus lender and broker fees of roughly 2 to 4 percent |
| Best used for | The destination | The middle step | The bridge: payouts, urgent closings, active proposals |
The pattern that works in practice is the step-down: use private financing to solve the immediate problem, move to a B lender once the proposal is complete and one to two years of clean credit exist, then graduate to an A lender when the proposal leaves your report. Each step should have a defined exit before you take it. Our overview of options for borrowers explains how equity-based approvals are assessed at the first step.
Rebuilding Credit After a Consumer Proposal: A Realistic Timeline
Lenders do not expect perfection after a proposal. They expect evidence, and evidence takes tradelines and time. The industry rule of thumb is the 2-2-2 rule: two credit accounts, with limits of at least $2,000 each, kept clean for two years.
| Stage | What to do |
|---|---|
| At completion | Get your certificate of full performance from your trustee. Pull both Equifax and TransUnion reports and dispute any account still showing an incorrect balance or status. Reporting errors after proposals are common and fixable. |
| Months 0 to 6 | Open a secured credit card, and consider a second tradeline such as a secured card from another issuer or a small installment product. Put routine spending through and pay in full monthly. |
| Months 6 to 24 | Keep utilization under 30 percent of each limit, never miss a payment on anything (phone and utility accounts included), and ask for limit increases rather than opening many new accounts. Scores in the mid 600s are a realistic two year target, with 680 to 700 the range where insured bank mortgages come back into reach. |
| Month 24 and beyond | With the proposal completed, two clean tradelines, and stable income, B lender approvals are routine and A lender approvals become realistic, especially once the proposal falls off your report entirely. |
If your credit challenges go beyond the proposal itself, our broader guide to getting a bad credit mortgage in Ontario covers scores, ratios, and lender expectations in more depth.
What If You Filed Bankruptcy Instead?
The logic is the same; the clock is longer. A first bankruptcy stays on your credit report for six to seven years after discharge, depending on the bureau and province, versus three years after completing a proposal. Insured bank mortgages generally require about two years of re-established credit after discharge, and B lenders want to see the discharge certificate plus clean history since. Equity still speaks first: private lenders assess a discharged bankrupt with 30 percent equity much the way they assess a proposal file, on the strength of the security and the exit plan.
Frequently Asked Questions
How soon after a consumer proposal can I get a mortgage in Ontario?
With 20 percent or more down or equivalent equity, B lenders can approve you at or shortly after completion, and private lenders even sooner. For an insured bank mortgage with less than 20 percent down, plan on completing the proposal plus about two years of re-established credit.
Can I get a mortgage while still in a consumer proposal?
Yes, mainly through private and equity-based lenders, and occasionally B lenders after a year or more of clean proposal payments. Most lenders will require the proposal to be paid out from the mortgage proceeds at closing.
Does paying off a consumer proposal early help me get a mortgage sooner?
Usually, yes. Credit bureaus remove a proposal three years after completion or six years after filing, whichever comes first, so completing early starts that clock sooner. Early completion also ends the R7 status and frees up the monthly payment for other obligations.
How much down payment do I need after a consumer proposal?
For an insured mortgage, as little as 5 percent, but only once you meet the roughly two years of re-established credit that insurers expect. Before that, plan on at least 20 percent for B lenders and 25 to 35 percent for private lenders.
Will my bank renew my mortgage during a consumer proposal?
In most cases yes, because your mortgage was not part of the proposal. If your payments are current, existing lenders typically offer renewal without requalification, though moving to a new lender at renewal means a full application where the proposal will count.
What credit score do I need for a mortgage after a consumer proposal?
Private lenders are score-flexible because they lend on equity. B lenders generally look for scores from the low 600s alongside clean post-filing history, while insured bank mortgages typically become realistic around 680 or higher with two years of rebuilt credit.
Where Richview Capital Fits In
Much of what this article describes, paying out a proposal with home equity, funding a purchase before the banks will, bridging the gap until B and A lenders reopen, is exactly the territory where alternative lending does its best work. Richview Capital is a Canadian mortgage investment corporation that provides equity-based mortgage financing across Ontario, with lending decisions built around the property and the plan rather than a bureau score.
If you are weighing an early proposal payout or need financing a bank cannot offer yet, we can look at your situation and give you a straight answer on whether the numbers work, including what your exit to cheaper financing looks like. Contact Richview Capital to start the conversation.
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Richview Capital MIC is a licensed Mortgage Investment Corporation (Mortgage Administrator License #13171). This article is educational information for Ontario homeowners, not legal, financial, or tax advice. Rates, fees, LTV limits, and approvals vary by file and underwriting, and published ranges are subject to change and are not an offer of credit.
