Quick answer: A consumer proposal does not cancel your mortgage. Your mortgage is secured debt, so it stays outside the proposal, and many lenders will renew it if you keep paying on time. Buying a new home or refinancing during a proposal usually means a B lender or a private lender. Once the proposal is paid off and you rebuild your credit for about two years, most people can return to bank rates.
I meet many homeowners in Surrey and the Fraser Valley who filed a consumer proposal to get control of credit card, tax or line of credit debt. Their biggest worry is the house. Here is what really happens.
What is a consumer proposal?
A consumer proposal is a legal agreement, filed by a Licensed Insolvency Trustee, to repay part of your unsecured debts over up to five years. It is available when those debts are under $250,000, not counting the mortgage on your home. Creditors have 45 days to accept, and once it is in place, payments to unsecured creditors and most collection actions stop. You keep your home as long as you keep paying your mortgage.
What happens to your mortgage renewal?
Because your mortgage is not part of the proposal, your current lender is usually willing to renew if your payments are up to date. Two things to watch:
- Some lenders renew only at their posted rate, which is higher than what they offer new clients. Ask for their best offer in writing.
- Switching to another lender at renewal is much harder during a proposal, because a new lender checks your credit again.
If your renewal offer is poor, a broker can check whether a B lender would offer a better overall deal.
Can you refinance during a consumer proposal?
Banks generally will not refinance while a proposal is active. B lenders and private lenders can, provided you have enough equity. A common reason is to pay the proposal off early:
- Ask your trustee for a payout letter showing the remaining balance.
- Arrange a refinance or a second mortgage to pay that amount.
- Your lawyer or notary pays the trustee directly at closing.
- Your trustee issues a certificate of full performance.
Paying off early starts the clock on removing the proposal from your credit report sooner. Weigh the cost carefully: your proposal payments are usually interest free, while a private loan is not. I show clients both paths side by side before they decide.
Can you buy a home after a consumer proposal?
Yes. A typical path looks like this:
| Stage | Usual options |
|---|---|
| Proposal active | Private lenders, a few B lenders, larger down payment |
| Paid in full, under two years of new credit | B lenders, often around 20% down |
| About two years of clean, rebuilt credit | Banks and insured mortgages may be possible again |
Lenders want to see new credit used responsibly, such as a secured credit card paid in full every month.
How long does a consumer proposal stay on your credit report?
According to the Office of the Superintendent of Bankruptcy, a proposal stays on your credit record for the term of the proposal plus three years after you complete it. Your name also appears in the public insolvency records. Paying the proposal off early shortens the time it stays on your report.
What should you avoid?
- Missing proposal payments. Three missed payments can annul the proposal and bring back your original debts.
- Expensive loans with no exit plan. A private mortgage should lead back to a normal lender, not into a cycle of renewals.
- Anyone who promises guaranteed approval or asks for large fees up front.
What are the key takeaways?
- Your mortgage is not part of the proposal, and renewal with your current lender is often possible.
- Refinancing during a proposal usually means a B lender or a private lender.
- Paying off early with your trustee's payout letter can speed up your credit recovery.
- About two years of rebuilt credit opens the door back to bank rates.
If you are in a proposal or just finished one, book an appointment. I will review your renewal or plan your path back to a bank mortgage, with every cost in writing. Our bad credit mortgage guide covers the broader options.
What other questions do readers ask?
Will my lender renew my mortgage if I am in a consumer proposal?
Your mortgage is a secured debt and is not part of the proposal, so many lenders renew if your payments are up to date. Some offer only their posted rate at renewal. Switching to a new lender during a proposal is much harder.
Can I pay off my consumer proposal early with a mortgage?
Yes, in many cases. You get a payout letter from your Licensed Insolvency Trustee, and a refinance or second mortgage pays the remaining balance. Once the proposal is completed, the three year clock for removal from your credit report starts.
How long after a consumer proposal can I buy a home?
Some B lenders consider you shortly after the proposal is paid in full, often with around 20% down. Insured mortgages with a bank usually need about two years of rebuilt credit after completion.
Does my spouse's credit suffer from my consumer proposal?
No. A consumer proposal is personal to the person who files it. If you apply together, though, lenders look at both credit files.
Where do these numbers come from?
- Office of the Superintendent of Bankruptcy: consumer proposals
- Office of the Superintendent of Bankruptcy: compare debt solutions
- Financial Consumer Agency of Canada: credit reports and scores
- Equifax Canada: how long information stays on your credit report
Published November 5, 2026. This article is general information, not personal financial advice. Rates and programs change, and every approval depends on your full application. Asim Ali is a licensed mortgage broker with Dominion Lending Centres A.I.M.I. Collective Mortgage Group.