Keeping your Home Despite a Job Loss

A mortgage holder's worst nightmare is losing their job.  For the majority of us, paying the mortgage is the most important monthly obligation.  You can negotiate short-term relief and even long-term restructuring with practically all of your creditors, including the phone company, the lenders of your auto loan(s), and the credit card companies, who regularly deal with late payment arrangements.  Mortgage lenders become anxious much more rapidly, but the majority are prepared to take into account at least one missed payment if your unemployment is just temporary.  

Mortgage Protection?

You might not have noticed this in the frenzy of paperwork and signing sessions that went along with buying your property, but you can have insurance that guards your lender against mortgage default.  Mortgage insurance is likely something you also pay for if your loan balance exceeds 80% of the value of your property at the time it was purchased.  Principal, interest, taxes, homeowner's insurance, and mortgage insurance are all included in the list of expenses you must pay each month.  See what protection it offers you; it is designed to protect the lender.

Consult your lender

It is crucial to communicate with your mortgage lender.  Job instability is so widespread in this country that many mortgage holders are now open to loan restructuring, provided you promptly inform them and are upfront with them about your employment prospects.  

A typical restructuring will let you make lower payments up until your income is restored; after that, the bank will restructure once more to get you back on track. Keep in mind that future employers and lenders are both virtually as likely to review your credit report.  

Determine what you can afford before speaking with your lender about this possibility.  Don't show appreciation for everything you receive and accept a financial arrangement you can't keep up with.  Inform your lender that the maximum temporary mortgage payment you can make is 60% of the standard rate rather than the 75% they're suggesting.  They also lose money if you lose the residence.

Bankruptcy – The Poison Pill

In the long run, declaring bankruptcy is the best way to keep your house while out of work.  Most of us are aware of the undesirable consequences of using this choice, albeit some of the strict guidelines have altered.  Prior to two years ago, credit card eligibility required seven years of no credit at all.  You might be qualified for high-risk vehicle loans and other debt within two to three years of filing for bankruptcy, depending on the specifics of your bankruptcy.  That naturally presupposes that you have resumed employment and are once more contributing to your home payments.  Additionally, bankruptcy has become so widespread that the federal government is about to make it a lot less appealing choice for customers.

Near Term Borrowing

Many consumers have put mortgage payments on their credit cards until the limitations on such cards are reached due to near-term unemployment and an uncertain future.  It can damage your credit score, but it will keep your mortgage current and prevent bankruptcy.  To bridge the gap in your monthly budget, you could try applying for a home equity loan, but this will be considerably more difficult if you are unemployed.  The home equity loan might be a good choice if there are other employed family members.