Perhaps you have a feeling job layoffs are coming so you are putting money aside. Or, maybe you have already been unpleasantly surprised and received the pink slip. If this is the case, you may be terrified when you realize you no longer have income coming in. While unemployment can be a stressful time, how you handle your finances can help determine whether you emerge unscathed or experience late payments and penalties.
Of course, it is important to meet all of your financial obligations, but you don’t want to fall behind on your mortgage payment. Luckily there are several strategies you can use to keep up with your home loan payments. Consider the following:
Steps to Take If You Haven’t Been Laid Off Yet
Refinance your mortgage now. Refinancing your mortgage will be very difficult once you lose your job, so if you think you might lose your job in the near future, refinance now. If you have a 15 year mortgage, perhaps draw it out to 30 years so your minimum payment is smaller. A drop in interest rate will also help you have a lower minimum payment.
Purchase unemployment insurance. While this insurance isn’t cheap (often costing as much as the PMI you pay monthly if you don’t have 20% or more of equity in your home), it can offer you protection. These policies cover your payments from 6 to 12 months. They may not pay your entire monthly payment, but they may pay enough that you can cover the rest without being financially burdened.
Steps to Take If You Have Already Been Laid Off
It is important to take steps BEFORE you default on your loan. Doing so gives you the best chance of keeping your home.
Contact the lender. You may think contacting the lender is the worst thing you can do, but it is not. Banks have had to handle plenty of foreclosures; if they can get the money from you by working with you, they want to do so. Let them know how much you can afford to pay a month and ask if they will lower the interest rate or refinance. Some may allow you to pay what you can now as long as you make up the difference when you are employed again. Others will let you modify your loan so that you temporarily pay interest only (usually for a period of 12 to 18 months).
Freeze your mortgage. If you go this route, you will need to hire an attorney who will contact the lender to challenge the loan, examining any possible lender errors in your mortgage as well as your ability to pay. This process can take several months to a few years, and during this time the lender cannot accept payments and cannot charge you interest.
While unemployment can be a scary time in your life, if you take appropriate steps, you can often work with your lender and come through your period of unemployment financially unscathed.

Jake Evans
Jake Evans