For someone with a mortgage, losing their job is a scary thought. Most of us put our mortgage payment at the top of our list of bills to pay every month. You can talk almost any creditor into short-term relief and even long-term reorganisation. The phone company, your car loan(s), and credit card companies all deal with late payment plans every day. Much more quickly, mortgage companies start to worry, but most are willing to let you skip at least one payment if you lose your job for a short time.
Mortgage Insurance?
You might not remember this because of all the papers and signatures you had to sign when you bought your home, but you may have an insurance policy that protects your lender in case you don't pay your mortgage. If your loan is more than 80% of the value of the home when you bought it, you probably also pay for mortgage insurance. It's part of the things you pay for every month, like the principal, interest, taxes, homeowner's insurance, and mortgage insurance. It's meant to protect the lender, but you should also look at how it protects you.
Talk to your Lender
Talking to your mortgage lender is important. Job changes are common enough in this country that many mortgage holders are willing to work with you to restructure your loan as long as you tell them quickly and are honest about your job prospects.
A typical restructuring will let you make smaller payments until you get back on your feet financially. When you do, the bank will restructure again to get you back on track. Keep in mind that potential new employers are almost as likely as potential lenders to check your credit score.
Before you talk to your lender about this possibility, you should figure out what you can afford. Don't be thankful for what you're given and agree to a payment plan you can't keep up with. Tell your lender that the most they can charge you for a temporary mortgage payment is 60% of the norm, not the 75% they are suggesting. Getting rid of the house also costs them money.
The poison pill is going bankrupt.
Filing for bankruptcy is the only long-term way to keep your home while you're out of work. Most of us know that if you choose this option, bad things will happen, even though the rules have changed a bit. Before, you couldn't get a credit card at all for seven years. Now, you can get one after only two years. Depending on the circumstances of your bankruptcy, you may be able to get high-risk auto loans and other debts within two to three years. That's assuming, of course, that you now have a job and are making your mortgage payments again. Also, bankruptcy is so common now that the Federal Government is almost ready to make it much less appealing to consumers.
Loans for the Short Term
Because they are about to lose their jobs and don't know what will happen next, many people are putting their mortgage payments on their credit cards until the limits on those cards are reached. It might hurt your credit score, but it will keep you up to date on your mortgage and keep you from going bankrupt. You can try to get a home equity loan to make up the difference in your monthly budget, but it's much harder to get one when you don't have a job. If there are other people in the house who have jobs, a home equity loan could be a good idea.
