A consumer proposal is a legal agreement, set up by a Licensed Insolvency Trustee, to repay part of your unsecured debts or take longer to repay them. It shows up on your credit report and limits which lenders will consider a mortgage application for some time, but it doesn’t rule out a mortgage. This page covers the timeline from filing to a mainstream mortgage, the lenders that work with borrowers at each stage, and how to prepare. It is part of the mortgage lenders and brokers guide.
A consumer proposal and your credit report
| Aspect | Details |
|---|---|
| What it is | An offer to unsecured creditors to pay part of what you owe, take longer to pay, or both, over no more than five years |
| Who administers it | A Licensed Insolvency Trustee (LIT) |
| Credit report notation | Usually shown as an R7 rating on the accounts it includes |
| How long it stays on the report | Equifax and TransUnion remove it 3 years after you’ve paid off the debts in it, or 6 years after you signed it, whichever comes first (FCAC) |
| Debts included | Unsecured debts such as credit cards, lines of credit, personal loans and tax debt |
| Debts outside it | Secured debts such as an existing mortgage or car loan, and some debts no proposal releases |
How the process works, what it costs and the debts it can’t release are covered in the guide to consumer proposals and bankruptcy.
Because the clock runs from the payoff date or the signing date, whichever ends sooner, paying the proposal off early can shorten the time it stays on the report.
Timeline to mortgage eligibility
The waiting periods below are typical lender practice, not rules; each lender and mortgage insurer sets its own.
During the proposal
| Status | Mortgage options |
|---|---|
| Proposal active, payments current | Mostly private lenders, with a large down payment |
| Proposal active, a solid payment record and strong income | Some B-lenders consider it with a down payment of 20% or more |
Many people in a proposal spend this phase rebuilding credit and saving rather than buying.
After the proposal is paid off
| Status | Mortgage options |
|---|---|
| Just completed, little rebuilt credit | B-lenders, usually with 20% or more down |
| Completed, with several months of rebuilt credit | More B-lender options and better terms |
Two or more years after completion
| Status | Mortgage options |
|---|---|
| About two years after completion, re-established credit | Some mainstream (A) lenders, including insured mortgages with a smaller down payment where the insurer agrees |
| Proposal off the credit report | The full range of lenders, judged on the current credit file |
Steps from proposal to mortgage
1. Finish the proposal
Payments made on schedule (or early) start the recovery clock. When the terms are met, the trustee issues a certificate of full performance, which lenders often ask to see.
2. Rebuild credit from the start
Rebuilding can start during the proposal, not only after it.
| Step | Typical timing | Why |
|---|---|---|
| Secured credit card | Soon after filing | Builds new positive payment history |
| Credit-builder loan | After a few months | Adds an instalment account |
| Second card | After about a year | Shows more than one account in good standing |
| Unsecured card | After completion | Shows lenders extend credit again |
On-time payments, balances paid in full and low credit utilization do most of the work; improving your credit score before a mortgage covers what moves a score and how long it takes.
3. Save a larger down payment
| Down payment | Effect |
|---|---|
| Under 20% | Needs mortgage insurance, so the insurer’s approval matters as well as the lender’s |
| 20% or more | No mortgage insurance; opens B-lender options sooner |
| Well above 20% | Offsets more of the credit history in the lender’s eyes |
Insurers set their own criteria on top of the lender’s. For a CMHC-insured purchase, at least one borrower or guarantor needs a credit score of 600 or more; CMHC may use other ways to judge creditworthiness for a borrower with no credit history. What CMHC mortgage insurance is covers the premiums and the other conditions.
4. Keep income stable and documented
| Employment type | What lenders look for |
|---|---|
| Salaried | Continuous employment, often two years or more |
| Self-employed | Two or more years of tax returns; see mortgages for self-employed borrowers |
| Commission | A two-year average; see mortgages with commission income |
5. Prepare the application
| Preparation | Details |
|---|---|
| Credit report | Shows the proposal as completed, with no errors |
| Documents | Pay stubs, T4s, Notices of Assessment, the certificate of full performance and recent bank statements |
| Credit scores | Both Equifax and TransUnion |
| A broker | Brokers know which lenders work with post-proposal borrowers; questions to ask a lender or broker covers what to check |
| Explanation letter | A short letter on what led to the proposal and what has changed |
The borrower still has to pass the mortgage stress test and the debt service limits like any other applicant.
Lender options by tier
Types of mortgage lenders explains the tiers in general; here is how each typically treats a consumer proposal.
| A-lenders (banks, credit unions, monoline lenders) | B-lenders | Private lenders | |
|---|---|---|---|
| Time since completion | Often about two years or more | From during the proposal to shortly after | Any time, including during the proposal |
| Credit | Re-established credit with no missed payments since the proposal | Some rebuilt credit | Less important; the loan is based mainly on equity |
| Down payment | Standard minimums where insurable | Usually 20% or more | Usually well above 20% |
| Term | Standard terms | Often one to three years, with a plan to move to an A-lender | Short terms, with an exit plan |
B-lenders and private lenders charge more than banks. Current mortgage rates shows mainstream pricing, the B-lender roundup covers B-lender pricing and the B-lender mortgage guide explains how alternative lenders work. Private mortgage lenders covers private loans and their fees.
Common mistakes
| Mistake | Why it hurts |
|---|---|
| Not rebuilding credit during the proposal | Pushes the timeline back |
| Applying too early | Each declined application adds a hard inquiry |
| Going straight to a private lender | High rates and fees can lead to more debt |
| Not disclosing the proposal | Lenders see it on the credit report, and hiding it is misrepresentation |
| Taking on new debt | Undoes the progress the proposal made |
Consumer proposal or bankruptcy
A first bankruptcy stays on the credit report for 6 years after discharge (7 with TransUnion in some provinces), and lenders generally view it less favourably than a completed proposal; getting a mortgage after bankruptcy covers that timeline. Choosing between the two in the first place is covered in the guide to consumer proposals and bankruptcy.
Related resources
- Credit score needed for a mortgage: score requirements by lender type
- What to do when the bank denies your mortgage: options after a decline
- How to increase your mortgage amount: ways to qualify for more
- Mortgage stress test calculator: the qualifying payment
Sources
The figures and rules on this page come from these sources, last checked against them between September 25, 2026 and September 29, 2026. How we check facts.
- CMHC: CMHC Purchase
- Financial Consumer Agency of Canada: How long information stays on your credit report
- Financial Consumer Agency of Canada: How much you need for a down payment