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Qualification

Consumer proposal

A formal arrangement under the Bankruptcy and Insolvency Act to repay creditors a portion of what you owe. Active proposals route mortgages to B and private lenders; A lenders typically require 24 months of clean post-proposal credit.

A consumer proposal is a legally binding deal, administered by a Licensed Insolvency Trustee, to repay creditors a portion of your debt over up to five years — a middle ground between struggling with payments and declaring bankruptcy. It stops collection calls and interest immediately.

While it's active, A lenders won't touch a mortgage, but B and private lenders will, often using home equity to pay the proposal out in full (which can also rebuild credit faster). After it's complete, A lenders typically want about 24 months of clean re-established credit.

Owning a home with equity during a proposal is actually an advantage — refinancing to settle it early can shorten the road back to prime mortgage rates.

Sources

  1. You owe money: consumer proposals (Office of the Superintendent of Bankruptcy)
  2. How long information stays on your credit report (Financial Consumer Agency of Canada)
Related on Mortgage Squad Advisors

See also

Credit scorePrivate mortgageAlternative lending

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Co-signer

A creditworthy individual (often a parent) who agrees to be equally liable for the mortgage so the primary applicant qualifies. The co-signer's income is added to the application; their credit is fully exposed.

Credit score

A 300–900 score from Equifax or TransUnion summarizing your credit history. Roughly 680+ opens the widest range of A-lender options; CMHC-insured mortgages need at least one borrower at 600 or higher; lower scores usually route to alternative (B) lenders.

Debt service ratio

The percentage of your gross income that goes to housing (GDS) or to housing plus all other monthly debt payments (TDS). On insured mortgages, CMHC caps GDS at 39% and TDS at 44%; the ratios are calculated at the stress-test qualifying rate.

Down payment

The cash you put toward the purchase. Minimums: 5% on the first $500K and 10% on the portion from $500K to $1.5M; at $1.5M or more, 20%. Below 20% requires CMHC, Sagen, or Canada Guaranty insurance.

GDS

Gross Debt Service ratio

Gross Debt Service ratio: your monthly housing costs (mortgage principal and interest, property tax, heating, and 50% of condo fees) divided by your gross monthly income. CMHC caps GDS at 39% on insured mortgages; uninsured and alternative lenders set their own limits.

Qualifying rate

The stress-test rate you must qualify at: the greater of your contract rate plus 2% or 5.25%. Doesn't change what you actually pay — only whether you qualify.

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