Example: paying off a consumer proposal early with home equity
Illustrative example, not a real client file. A composite scenario showing how a file like this can be structured. Any rate shown is a dated assumption, not a current rate or offer; see today’s rates on our live board.
One year into a five-year proposal, an illustrative homeowner with strong equity borrows against it to pay the proposal out in full, completing it early and shortening the road back to prime pricing.
The proposal had four years to run. Each of those years meant premium (non-prime) pricing on any financing and a delayed return to A-lender eligibility.
The borrower had ample home equity but no lump sum of cash — so the question was whether the cost of tapping equity was worth the time it would save.
We modelled the payout math carefully: home value, existing first mortgage, the amount to settle the proposal in full through the trustee, and fees — confirming the refinance would leave a healthy equity cushion rather than drain it.
Because the proposal was still active at funding, we arranged a private second mortgage sized to settle it. The proceeds went to the trustee, the proposal completed, and the discharge clock started immediately — compressing a four-year runway into the time it took to close. We set the exit to refinance into A pricing once credit seasons.
Settling early started the discharge clock years ahead of schedule. The premium on the short private second was modest next to four more years of non-prime pricing — and it was only pursued because the equity was ample enough to keep a strong cushion. On a thinner-equity file, the honest advice would have been to wait.
Figures are illustrative scenario assumptions (2026), not current rates, quotes or a record of a funded deal. For current pricing, see today’s rates.
With ample equity, paying a consumer proposal out early can compress the whole recovery timeline. It only makes sense when the math works and it doesn't drain your equity — which is exactly why the numbers get modelled before anyone commits.
Rules and sources this example relies on
- You owe money: consumer proposals (Office of the Superintendent of Bankruptcy)
- How long information stays on your credit report (Financial Consumer Agency of Canada)
- Borrowing against home equity (Financial Consumer Agency of Canada)
Illustrative example, not a real client file. This scenario is a composite written to show how a file like this can be structured; it describes no real client, and no real outcome is claimed. Any rate shown is a dated scenario assumption (2026), not a current rate or offer. Approvals, rates, fees and costs depend on your situation and on lender and insurer criteria at the time of application.
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