How Losing your Job Affects your Mortgage [Infographic]
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Job Loss and Mortgage
Sometimes life throws you a huge lemon and you cannot use it to make lemonade. When you lose your job, you are losing more than just somewhere to go between the hours of nine and five; you’re losing income. If you find yourself unemployed, you may not be able to make your monthly mortgage payments. Before you start selling all your belongings, there are certain things you can do.
- Talk to your mortgage professional at the first sign of financial difficulty. Do not wait until you’ve been home for a week. The day after you lose your job, call your broker. Loss of income can lead to missed mortgage payments. Missing payments is a big deal and you do not want that to happen. If you have good credit, your broker will figure out the next steps before your financial situation becomes dire. Your broker may suggest taking out a second mortgage or do a cash-out refinance on your existing mortgage. If you did not work with a broker to secure your current mortgage, now may be the right time to start.
- Leave the lender out of it. Do not contact the lender directly if you have lost your job. The chance that the lender will offer a solution is slim. Let your broker handle everything. They’re the ones who've established the relationship with the lender in the first place, so it’s best to allow them to communicate your financial situation to the lender if need be.
- Ask your broker about a HELOC. This is a home equity line of credit that allows you to withdraw funds as needed. However, HELOCs are only band-aid solutions to your bigger problems. They buy you some time until you can find a new job but once you have one, you will have to pay it off along with your mortgage.
- You can always sell. If you’re worried about finding a new job, you can sell your home. You may not be able to obtain the home’s full value but like a HELOC, this option buys you time.
- Consider a forbearance agreement. Your broker will help you enter into this agreement with your mortgage lender. This agreement suspends or reduces your monthly payments for a short period of time. Usually, a forbearance agreement lasts no longer than six months and there is a catch. After the reduced or suspended payment period ends, a repayment plan comes into effect. This plan ensures that you will make your regular mortgage payments plus an additional sum that will cover the lack of payments from the forbearance stage. The repayment period can last up to a year and should bring you up-to-date with your mortgage and the lender will not suffer a loss.
- Say goodbye to your savings. This only applies if you have savings set aside. Maybe you were amassing these funds for retirement or a rainy day, but whatever they were for, you will now have to use them to pay your monthly mortgage payments until you get a new job.
Losing job can be a very stressful experience to everyone, but don't bottle things up, make sure that you deal with the financial consequences of employment by following all these tips.
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How Losing Your Job Affects Your Mortgage
- Call your mortgage broker the day after you lose your job!
- Never contact the lender directly. Let your broker handle everything!
- Ask your broker about HELOC.
- Remember! You have an option to sell.
- Know about forbearance agreement!
- Wisely use your savings!
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About the Author
Lori J Sanders was born and raised in Toronto. She has been a proponent of business education, investing, a self-help author and a motivational speaker. She operates on her own blog and she speaks up on whatever that comes to her mind about finance, investment, mortgage renewals. With various real-estate investments, she retired at the age of 46. But she still continues to operate external business ventures and various investments.
For more information, follow her on Twitter.
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- When you lose your job, you are losing more than just somewhere to go between the hours of nine and five; you’re losing income.
- The day after you lose your job, call your broker.
- Let your broker handle everything.
- HELOC or home equity line of credit allows you to withdraw funds as needed.
- Consider a forbearance agreement which suspends or reduces your monthly payments for about 6 months.
- You may need to dip into your rainy day fund or savings in order to make payments until you get a new job.