Can I refinance my mortgage to pay off a consumer proposal?

Are you struggling with a consumer proposal? Find out whether you should refinance your mortgage to get rid of your debt. 


Woman reviewing loan details with a financial advisor

If you own your own home and are struggling to get out of a consumer proposal, you might want an easy solution to pay off your debt. While refinancing your home could seem like an appealing option, it might not be the best idea once you consider the potential downfalls.

Find out more about what can happen if you refinance your mortgage to pay off your consumer proposal, and learn what other options are available to help you get your finances back on track.

Marble Fast-Track Loan

Marble Fast-Track Loan


18.99 % APR


  • Build up your credit score
  • Competitive interest rates
  • Loans available to pay out consumer proposals

Marble Fast-Track Loan

Apply today for a credit builder loan and improve your financial health. Borrow anywhere from $2,500 to $15,000. This loan is strictly for borrowers exiting a consumer proposal.

  • APR: 18.99% – 24.99%
  • Loan amounts: $2,500-$15,000
  • Loan terms: 36-84 months
  • Fees: Legal and admin fees of $295 - $1,500 (based on size of loan)
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What is a consumer proposal?

A consumer proposal is a legal agreement that you’ll enter into with a legal trustee (also called a Licensed Insolvency Trustee). This agreement typically forgives a portion of your debt and lowers your monthly payments so that you can begin repaying what you owe. It also gets your creditors off your back, and ceases all forms of debt collection and legal action against you.

The major downfall of a consumer proposal is that once it’s accepted, it will bring your credit score down to one of the lowest scores possible (an R9). This is the same score that you’d get if you filed for bankruptcy. Once you pay your consumer proposal off, a note will remain on your account to identify that you filed for one. This will continue to affect your credit score for three more years.

Can I refinance my mortgage to pay off my consumer proposal?

You can refinance your mortgage to pay off your consumer proposal, but it’s a risky move that you should typically try to avoid at all costs. This is because most lenders will reassess your creditworthiness if you apply to adjust your home loan. They won’t typically bother doing this if you leave your mortgage alone and continue to make your payments like clockwork.

If your current lender chooses to check your credit, you could end up losing the financing that you already have in place for your mortgage. This is because it will likely deem you a “risky borrower” due to your low credit score. This could leave you in a mad scramble to get a new home loan from another provider, typically with much less favourable rates.

Compare credit builder loans as an alternative to a mortgage refinance

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score
Marble Fast-Track Loan
18.99% – 24.99%
36-84 months
Legal and admin fees of $295 - $1,500 (based on size of loan)
Marble Financial offer credit builder loans in amounts from $2,500 to $15,000. Improve your financial health within 36 months. This loan is strictly for borrowers exiting a consumer proposal.
Refresh Financial Credit Builder Loan
3-5 years
No administration or origination fees.
No funds are provided by Refresh upfront. Instead, funds are placed into a secured account to be accessed later. Your payments are reported to the credit bureaus, potentially impacting your credit score.

Compare up to 4 providers

What will my lender look at if I decide to refinance my mortgage?

If you decide to refinance your mortgage, it’s likely that you’ll have to apply for a new mortgage with a private or B-lender as most big banks won’t refinance customers with bad credit. Your best bet to start is to approach a mortgage broker to find out if refinancing is even possible.

From there, the broker will do a thorough assessment of your current financial situation to see if you have any leverage to apply for a new loan. This will include assessing the marketability of your property, determining the amount of untapped equity in your home and exploring what led you to file a consumer proposal in the first place.

Infobox: Will a consumer proposal affect my current mortgage?

If you already have a mortgage, your consumer proposal won’t typically affect this loan because it’s secured. This means you can’t repay your mortgage with a consumer proposal. It also means that your lender won’t know you’re struggling with a consumer proposal unless it has a reason to reassess your credit.

The only way this will typically happen is if you miss payments on your current mortgage or you apply to refinance your loan. You may also have difficulty renewing your mortgage if you decide to switch lenders, since any new lender will definitely factor your credit score into its loan decision.

Why would I want to pay my consumer proposal off early?

The main reason why you might want to pay your consumer proposal off early is so that you can start to rebuild your credit. When you file for a consumer proposal, your credit score will take a big hit. Your rating will go down to an R9 (which is the score you get for bankruptcy) and it will stay that way until you pay your consumer proposal off.

The problem is that once your consumer proposal debt is wiped out, you’ll still have to contend with a negative mark on your credit report for three years. During this “waiting period”, you’ll have difficulty qualifying for loans and other forms of financing. This is why paying your consumer proposal off ahead of schedule can help you improve your finances faster.

Are there other options to pay down my consumer proposal?

There are a number of options you can pursue to pay down your consumer proposal faster.

  • Take out a consumer proposal loan. You may be able to qualify for a specialized loan that will let you pay down your consumer proposal much faster.
  • Pay more each month. You can put more money down each month or increase your payment frequency to pay off your debt in record time.
  • Pay a lump sum onto your balance. If you get any unexpected income from an inheritance or tax return, you can put this money onto your consumer proposal.
  • Borrow from family or friends. If the amount you owe is small enough, you may be able to borrow extra funds from family or friends to cover your last payments.

How can I improve my credit score after a consumer proposal?

There are a number of steps you can take while you’re in the “waiting period” of your consumer proposal to improve your credit:

  • Make your payments on time. The best way to improve your credit score quickly is to make your payments on time and avoid missing payments.
  • Get a secured credit card. You can put up cash to get a prepaid balance on a secured credit card, which will help you to build credit for making everyday purchases.
  • Avoid closing old accounts. You should avoid closing credit cards that you have a solid payment history on as this will bring your score down.
  • Mix up your credit types. Make regular payments on a couple of different types of credit (including loans, lines of credit and credit cards) to build up your score.
  • Review your credit report. You might want to double-check your credit report for errors at least once a year to make sure you’re not being penalized for incorrect data.
  • Access credit counselling. You could benefit from speaking with a credit counselling service about how you can build up your credit score without the need for another loan.

Bottom line

You can refinance your mortgage to pay off your consumer proposal, but it might not be the best idea. Find out why it could actually hurt your financial situation to fold your consumer proposal into your home loan. And learn what other financing options exist to help you get out of debt faster so that you don’t need to refinance your mortgage.

Frequently asked questions about consumer proposals

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