For many Canadians, buying a home is a major financial goal. This goal may seem challenging for various reasons but having filed a consumer proposal or bankruptcy shouldn’t be one. It’s a common misconception that filing a bankruptcy or a consumer proposal will prevent you from getting a mortgage and owning a home. On the contrary, being proactive about settling your debt is the best path to future homeownership.
Can you get approved for a mortgage if you have debt?
It could be challenging. Banks and other mortgage lenders consider many factors when approving an individual for a mortgage. These factors include employment, income, assets owned, debt, and credit history. Concerning debt, the amount you owe, length of loans, and debt-to-income ratio are factors lenders consider when assessing your mortgage eligibility. If your debt levels are too high or your debt ratios don’t meet the lender’s standards, they may decline your application. Getting approved for a mortgage could be difficult if you have debt and cannot make payments to reduce the principal amount.
Can filing a bankruptcy or a consumer proposal help you buy a home?
Yes, by settling your debts. Formal debt solutions can provide you with a financial fresh start. Once the insolvency process is complete, you can focus on rebuilding your credit without the baggage of old debt, bettering your creditworthiness in the eyes of banks and other lenders.
Consumer proposals allow you to reduce your debt by up to 80% and simplify your repayment into a single, interest-free monthly payment. With a clear, customizable plan, you can escape the endless cycle of minimum debt payments and interest and get closer to your goal of homeownership.
But don’t bankruptcies and proposals affect your credit?
Yes, but only for a while. While both processes impact your credit, they provide a light at the end of the tunnel. Depending on your province, a bankruptcy will show on a credit report for six to seven years after discharge. A consumer proposal will be removed from a credit report three years after you’ve fully performed the proposal. So, while there will be an impact on your credit history, it won’t be forever and will at most delay your ability to be approved for a mortgage at a regular interest rate.
Sharing your goal of homeownership when meeting with a Licensed Insolvency Trustee will allow your trustee to advise you on your best course of action for debt relief and how to rebuild your credit.
Can someone who has filed a bankruptcy or a consumer proposal be approved for a mortgage?
Yes, if you take the right steps. Your approval will be based on your creditworthiness and spending behaviour once you’ve been discharged from bankruptcy or completed your consumer proposal, and your certificate of full performance is issued. To help set you up for success after completion, you’re required to participate in two financial counselling sessions. Our certified counsellors will offer insights and advice on rebuilding your credit and establishing smart spending habits so that you can become an eligible mortgage candidate.
When should you seek professional advice?
When you spot the signs. It’s best to seek professional advice as soon as you experience one or more warning signs of unmanageable debt. The good news is that a consultation with a Grant Thornton Licensed Insolvency Trustee is free and requires no commitment after the fact. If you find yourself questioning whether you’ll ever be able to pay off your debts and achieve your dream of homeownership, reach out to our team at any time for prompt, accurate, and helpful advice. Book your free, no-judgment consultation and start the road to debt freedom today.