How can I pay my mortgage if I’m made redundant?
If you’ve been made redundant, one of the first questions you may have asked yourself is how you’ll continue to pay your mortgage. Mortgage repayments are a large portion of most homeowner’s general expenses and losing your job can strain your ability to make these repayments.
But the good news is that if you’ve been made redundant, there is help available. Here’s what to do.
Claim under any protection you may have
The first step is to check if you’ve got any protection in place that will cover you if you’re made redundant such as mortgage payment protection insurance. If you do, check your policy to see if you’re able to make a claim.
Speak to your mortgage lender
Your mortgage lender will be able to give you advice on how to pay your mortgage, and the different support options available to you. A popular option they may suggest is to take out a mortgage payment holiday, also called a freeze or a deferral.
What does this involve?
- A mortgage holiday allows you to not have to make any mortgage payments for a limited period of time.
- You can request a mortgage payment holiday of up to six months in total, although lenders can only agree to payment holidays of up to three months at a time.
- You can apply for coronavirus-related mortgage payment holidays until 31 March 2021. Under this scheme, all payment holidays must end by 31 July 2021.
Taking a mortgage payment holiday means the pressure on your finances may be relieved in the short term. But remember, you’ll still be charged interest whilst you’re taking it. This means the overall amount you pay for your mortgage is likely to increase.
Also, taking a payment holiday could have a bearing on future lending decisions. Whilst this then may be an option to bear in mind if you’re struggling to make mortgage repayments, you should always consider the long-term implications of any financial schemes you take advantage of.
Claim any benefits you’re entitled to
If you have lost your job, then ensure you claim any benefits you’re entitled to. There are online calculators that can help you see what you’re able to claim.
And if you’re on certain benefits and you’re struggling to pay your mortgage, you may be able to get help from the government to pay the interest. This is called Support for Mortgage Interest (SMI).
How SMI works:
- What do I get? If you qualify for SMI, the government will pay the interest on up to £200,000 of your mortgage, or up to £100,000 if you’re receiving Pension Credit.
- How is it paid? SMI is paid as a loan which you’ll need to repay with interest when you sell or transfer ownership of your home. And payments are usually made directly to your lender.
- How quickly can I get access to it? There’s a 39-week waiting period from the time you claim SMI until your first payment is made. If you’re on Universal Credit, the waiting period is nine assessment periods (the equivalent to nine consecutive months). However, those getting Pension Credit can get the help straight away.
When it comes to calculating how much they’ll pay, the government uses a standard interest rate. This may be different to the interest rate you’re paying on your mortgage. And bear in mind, SMI can only help pay your interest payments. It won’t pay off the capital of your mortgage.
Do everything you can
And if you’re facing financial hardship it’s more important than ever to make the most of every penny you have.
Go through your monthly budget carefully and see where you can slash your spending.
Look at ways to maximise your income too (is there any temporary work you can get to keep you going while you’re looking for your next position?) Also have a clear out at home to see what you can sell that you don’t need any more to raise funds.
Don’t be afraid to seek help
If you’ve lost your job and want to find out more about protection and insurance policies, or you just want a chat with people who are here to help, our expert protection advisers are always here.
For insurance business, we offer products from a choice of insurers.
Feel free to get in touch here.
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.