Losing Your Job – Effects on Paying A Mortgage
Lost your job? Struggling to pay your mortgage? Falling behind on home loan repayments is very serious. However it’s a common occurance where someone loses their job, gets fired, can no longer work for some reason, or gets made redundant. You may also no longer be able to work due to a sickness, medical condition or disability. Your income is typically your primary way of paying your mortgage and if you don’t have a strong handle on this, the situation could turn difficult, very quickly.
A lot of people in these situations find themselves needing emergency financial assistance or help paying the mortgage and bills.
Your home loan in a serious obligation
Your home loan is something that you usually need to take very seriously. For many New Zealanders, they owe hundreds of thousands of dollars to their bank. Their home loan needs to be paid regularly, and if these repayments on their home loan are missed, it can raise some serious consequences. Being a long term customer of a bank, or having good repayment history in the past, may help slightly, but it is not often going to help the great seriousness of this.
Losing your job is serious
Many people lose their jobs. While it can hurt, and be a difficult situation, it is important to realise that you often need to get back up on your feet financially – and be quick about it. Dwelling on the past is not quite going to help, and might mean that your finances get worse before you know it. You can lose your job or no longer be able to work, for a range of reasons. These can include:
- Being made redundant or undergoing a restructure – you may be moved on if your employer can no longer afford
- Disciplinary action or being fired – some people lose their jobs after being fired
- Employer closes down – Some companies or employers close down and can no longer afford to be in business
- Sickness or Disability – You may find yourself unable to perform your normal duties or continue in your job. This can sometimes be because of a major health issue, or incurring a disability. Sometimes you are able to retrain or find a different way of working. But some people leave work for these reasons. While this isn’t an ideal circumstance at all, it is a reality that some New Zealanders can no longer work for these reasons
Getting financial help
You might be able to get financial help towards the home loan or mortgage. Work and Income’s website has a useful guide to help you understand what might you able to get. You can enter details of your situation, including any income you might still have, your family situation, etc. and find out if you are eligible for some government help.
There is also an “A to Z” list of different benefits that you can access.
Many New Zealanders are entitled to benefits to help them financially.
Speak to your bank or lender
It can be worth discussing the situation with your bank or lender. They may be able to consider your circumstance and see what can be done in the interim to help. Some banks allow a ‘mortgage holiday’ or similar which allows you to potentially have a few weeks off paying your mortgage. This can be very helpful in recouping your finances and giving you time to find a new job.
Remember: Banks also typically have a policy that they can explain to you about what they can do for customers who are experiencing hardship.
Your bank also may be able to discuss changing your home loan to an ‘interest only’ basis. Whilst this isn’t available for everyone, it is one way of the bank lowering your repayments in the short term. It means that by paying the interest only, your mortgage installments are typically smaller.
Refinancing or changing lenders
If the situation is not looking bright, you may need to consider changing lenders. Sometimes moving lenders or getting a “Mortgage Rescue” package would be one way of saving yourself from the prospect of legal action from your bank.
Rather than falling behind on mortgage repayments, you might in reality be able to afford lower repayments with another lender. Your current bank might not allow that, but with the help of a good mortgage broker, they might be able to help you find a lender that would accept lower repayments.