Job loss, what can you do to stay in your home if you are not working or earning any money?
Job loss can be a very emotional process to live through, and it causes a broad range of practical issues that need resolving as quickly as possible. How are you going to pay your essential bills? How can you put food on the table? And perhaps most urgent if all: how are you going to keep a roof over your head.
If you do not receive any warning about the job loss, the need to act quickly is of paramount importance. Several issues need to be considered right off the bat, including whether or not you’re able to find help with paying a mortgage when unemployed.
Make your mortgage repayments your priority
The chances are your mortgage repayment is your single largest monthly commitment. It, therefore, makes sense to make this your top priority. Unless you have insurance that covers unemployment and pays your mortgage for you, you will either need to find the money to cover your repayments, reach an interim agreement with your loan provider or find a different solution.
What should I do first if I lose my job?
Talk to your mortgage provider
Call your loan provider and tell them that you’ve lost your job. You might be able to arrange an interim solution, such as a payment holiday. The provider will give you advice on what to do next, and how to avoid losing your home further down the line. Financial institutions have a legal responsibility to help you keep your home, so be completely upfront and honest.
Check if your mortgage covers repayments through job loss
Whether it’s a benefit of your job, a private policy or a feature of your home loan, payment protection insurance could cover repayments for a period. These policies cover you for redundancy, so they should be your first port of call. However, most of these policies have a time limit, so you need to claim as quickly as possible.
There’s a chance that you were sold this type of protection without realising it, so don’t assume you have no insurance in place. Contact your mortgage provider, your credit card companies, your bank and any institution with whom you have a loan to see if you have payment protection.
If for any reason you make a claim for payment protection, and it is refused, all might not be lost. If you didn’t ask for the policy, you should be able to claim back all of the payments, as well as any interest your money would have earned. These funds could be enough to pay your mortgage repayments.
Job loss – check if you’re entitled to benefits
If you lose your employment through no fault of your own, and you don’t have significant savings in the bank, you should be eligible to claim Jobseeker’s Allowance straight away. You may also qualify for help with mortgage interest repayments through the Support for Mortgage Interest scheme. If you’re eligible, these payments will be made directly to your lender.
Qualifying criteria for Support for Mortgage Interest
You must qualify for certain benefits to get help with your mortgage interest payments:
- Income support
- Income-related Jobseeker’s Allowance
- Income-related Employment and Support Allowance
What are claimants entitlement?
You may be able to claim interest repayments on a mortgage of up to £200,000, but only after a 30-week waiting period — after first claiming benefit.
If you’re claiming Pension Credit, the financial help might be available straight away, but only on mortgages of up to £100,000.
In both cases, there is no support for capital repayments, so you will either have to find a new job or take more drastic action.
I can’t afford my mortgage repayments. What next?
First, contact your home loan provider and be honest about your situation. There may be some options available to you at this stage:
- Adding arrears to your mortgage
- Taking a repayment holiday (but only if the facility is available with your mortgage product)
- Working out a bespoke repayment plan (this is a short-term solution that will depend on your current standing with your provider)
- Selling your house and settling your mortgage
- Repossession (which will require a court order)
Job loss – help with selling your home
If you’re out of work and facing mortgage arrears, it is highly unlikely that you’ll be able to add arrears to the capital portion of your mortgage. Similarly, a repayment holiday may also be a non-starter. If you let the bank repossess your home, you will incur further costs, adding to your debt burden going forward. Also, your credit status will be adverse — affecting your ability to obtain another home loan when you get back on your feet.
The most sensible and proactive solution is usually to sell your home and use the proceeds to pay off your mortgage. A bank won’t often pursue a repossession order until you’re at least four months in arrears, so act fast, and take control of your financial future and stop any potential repossession.
The problems with selling on the open market
If you need to sell a property because of job loss, you’re under the gun from the outset. It’s a race against time to cash in on your property and pay of your debt. Although you may find a buyer reasonably quickly, some things may derail your house sale before completion, including:
- A broken property chain
- Problems with the buyer’s finance
- A sudden change of mind on the buyer’s part
- Issues with the various searches and legal checks
If you’ve waited for two months for the sale of your house to go through, a last-minute collapse of the deal could leave you helpless — making repossession unavoidable. However, there is another way.
Selling your home to a house buying service
A home buying service such as Flying Homes will value your property based on its features and current market conditions. You’ll get a fair offer that won’t change at the last minute — it’s then your choice to accept or not. If you do accept, there are several benefits of doing so:
- You don’t need to market your property.
- You don’t need to host property viewings.
- No price negotiations.
- No property chain.
- A cash buyer.
- No conveyancing costs.
- All hard work carried out on your behalf.
- Cash from the sale your bank within two weeks (more likely, two months).
Whatever situation you find yourself in after losing a job, acting fast is always the key. If you take control of your mortgage from the outset, it won’t take control of you later down the line.