-
Cannot Afford To Pay Mortgage Due to Job Loss
What if I just lost my job and cannot afford my mortgage payments?
-
1 Reply
-
If you have recently lost your job and are worried about how to pay the mortgage, take action now. Act fast to review your options and minimize the chances of losing your home. Here’s what you can do:
Contact Your Lender Immediately
Let them know: Contact your mortgage lender immediately and tell them about the situation. They may have programs for borrowers experiencing temporary financial problems.
Forbearance:
- They may offer a forbearance plan that temporarily reduces or suspends your monthly mortgage payment.
- Remember, you could make reduced or no payments during that time.
- Those missed amounts will eventually need to be paid back.
- Usually, through a modification of loan terms or a repayment plan later on when things get better (loan modification).
Loan Modification Could Help
Loan Modification: If it looks like this hardship will last longer than expected. Then, ask if qualifying for a loan modification is possible where they change certain agreement terms, such as lengthening its term to decrease installments.
Government Programs Might Be Available
Hardship programs: Some government initiatives, like the Home Affordable Modification Program (HAMP), were created to help homeowners who cannot afford their monthly mortgage payments.
Unemployment Mortgage Assistance Programs:
- Some states offer assistance programs for different homeownership segment groups affected by unemployment.
- These schemes provide support in paying off mortgages during difficult financial periods.
- Difficult times were caused by losing employment opportunities following either company closure or bankruptcy filing.
Refinancing Can Save Money
- Refinancing can save money, especially if there is still income after a job loss or if there is an expectation of better days ahead.
- Someone may consider refinancing, whereby an individual swaps an old debt obligation for a new debt instrument bearing lower interest rates.
- Thereby cutting required monthly payments.
- However, most lenders require proof of steady employment history when someone has been laid off.
Review Your Budget
Cut non-essential expenses: Look through your budget and find items that can be eliminated without impacting essential payments like the mortgage.
Emergency savings: If you have an emergency savings account, now is the time to use it to cover your mortgage payment until you secure a new job.
Rent out a Room
Get additional income: Consider temporarily renting out one of the rooms in your home to earn more money that can be used to pay the mortgage during this difficult period.
Get Legal or Financial Advice
Housing counselor: Find a HUD-approved housing counselor who can help you understand your options and negotiate with your lender on your behalf.
Legal counsel: When foreclosure looms, it may be a good idea to find an attorney who can inform you of your legal rights and help you explore different defenses against the creditor—for example, the bank.
Consider selling the home.
Sell before foreclosure: If it becomes clear that you won’t be able to keep up with monthly mortgage payments for an extended period. Consider selling the property sooner rather than later. This will save some equity and prevent ruining one’s credit forever through the long-term foreclosure process…
Think about a short sale.
Short Sale:
- If an appraisal of the current market value indicates that a residential real estate asset has depreciated significantly.
- It leaves the remaining balance on the loan much higher than it is worth.
- Then, there is another option called “short sale.”
- A short sale is when the seller gets rid of said property at less than the unpaid principal amount plus interest.
- The short sale is subject to approval from the lien holder (lender).
- Though the record will still be tarnished, it is better than when the bank takes full possession through repossession or other means.
Unemployment benefits:
Unemployment Insurance: Apply for unemployment insurance if you qualify. These funds could help pay necessary bills, such as a mortgage, during the job search period.
Final Thoughts:
- Taking immediate action and being transparent with your lender is crucial when facing financial difficulties.
- Most lenders are willing to work with borrowers actively seeking help, and resources are available to guide you during this tough period.
Thank you! Here are some more options if you lost your job and can’t pay your mortgage:
Programs That Can Help You With Your Mortgage Payments
Help from State: A handful of states offer programs specifically to unemployed homeowners. They may provide grants or interest-free loans which cover mortgage payments over certain periods.
Deferment application:
Deferment:
- Similar to forbearance, deferment allows a temporary halt in making mortgage payments.
- However, unlike forbearance, missed payments are not due immediately after the deferment period elapses.
- Instead, they get tacked onto the end of the loan term.
HELOC
Use Home Equity: If substantial equity is trapped within one’s residence coupled with a good track record on credit ratings, then qualifying for a Home Equity Line Of Credit (HELOC) is attainable. It gives a line of credit that can be used towards paying off mortgages when one is unemployed.
Reverse mortgage(for seniors)
Reverse Mortgage:
- Should you have attained a minimum age of 62?
- You could be eligible for reverse mortgages, which allow the conversion of some home equity into cash.
- This option might cover living expenses, including monthly mortgage payment obligations.
- Without requiring borrowers themselves to make regular payback installments.
Withdrawals from retirement accounts due to hardship
- 401(k)or IRA withdrawal
- As a last option, someone might take money from their retirement account, such as a 401(k)or IRA, to pay home loan dues.
- Be advised that such a decision may attract penalties and tax implications.
Find someone to live with or rent from you.
House Hacking: One should consider renting out the extra space in their home or apartment to make more money. This will help them cover the mortgage and give them some financial breathing room.
Take on odd jobs
Freelance or Temporary Work: You can pick up gigs here and there while looking for full-time work to help pay the bills. TaskRabbit, Upwork, and Uber are all great platforms that offer flexible ways of making quick cash.
Charitable loan repayment assistance programs
Non-Profit Organizations: Many non-profit organizations and local charities have programs that provide financial assistance to homeowners struggling to make their mortgage payments due to temporary financial setbacks. These groups can also help with other essential expenses or even rent.
Refinance into another type of loan.
Interest-Only or Adjustable-Rate Mortgages (ARM): If you expect your financial hardship to last only a short period, you can refinance into an interest-only or adjustable-rate mortgage (ARM), which will lower your monthly payment for a set amount of time.
Sell now, move later.
Sale and Rent Back: In some cases, it may be best for someone to sell their house but then remain in it as a tenant once it’s been bought by an investor. This allows them more income from sales proceeds while providing enough time to get back on track financially without immediate relocation needs.