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Will redundancy affect my mortgage?
Redundancy can be a really worrying time. If you do lose your job, it means you may struggle to keep up with your mortgage payments.
Whether you’re currently out of a job, you’re handed in your notice or redundancy is in the air at your work, it’s important to act now so you’re in the best position to carry on paying your mortgage.
Prioritise your mortgage and your bills
So long as you have worked for your employer for two years or more, you will be able to get statutory redundancy pay.
Your employer may have their own redundancy policy in place, and they may offer you more than the statutory amount – but they can’t offer you less. And, some may even pay you if you’ve worked for them for less than two years.
If you have some redundancy pay, it’s important to sit down with a calculator and a list of your regular outgoings. It may work out that you have around three or four months’ pay, so this means you can continue to pay your usual bills – including your mortgage – for that amount of time. But, with some strict budgeting, you might be able to make the money stretch further. There’s a calculator to figure out how much statutory redundancy pay you’re entitled to on the gov website here. It’s worth reining in your spending on non-essentials while you look for a job, as this means you’ll have more cash set aside for paying your mortgage and other bills.
Do you have mortgage insurance?
You may have already signed up for Mortgage Payment Protection Insurance (MPPI). If you have, your payments should be protected, as the insurer will often cover your mortgage payments if you’re made redundant - at least until you find a new job.
Another type of insurance that could protect your other outgoings is Payment Protection Insurance (or PPI). It’s become renowned for being mis-sold at a high price, but it can offer you protection if you do have a policy out at the moment. Instead of covering your mortgage payments, it should cover any loan or credit card repayments you get until you have a new job.
Unfortunately, if you’re redundant already or it’s fast approaching, it’s unlikely you’ll be able to take out this kind of insurance. If you’re just planning for future possibilities, then you might want to consider taking out a MPPI policy.
If you’ve been hunting for a job, but you’re struggling to find anything that offers as much as your last job, you may want to think about downsizing.
This can be a tough one to come to terms with, especially if you’ve invested a lot of time and care into your home. But, if it’s a pretty spacious house or you’ve got spare rooms and you’re not using all the space, selling it could be a good way to make some cash and free you up from mortgage payments.
Usually, this will work best if you live in an area that’s popular with buyers and where you’re likely to get a quick sale. The faster you can sell up and get out of there, the sooner you’ll have the extra funds in your account. Plus, moving to a new area might free up a bit of cash and throw up some new job opportunities that you might not have had otherwise.
Moving house is a big commitment though, so it’s important not to rush into this. Even if you’re downsizing you’ll need money for things like solicitor’s fees, stamp duty, moving costs. So, if where you live now is the home of your dreams, it’s worth widening your job search so you’ll be able to continue paying your mortgage – you can always take on a part-time position and keep on looking.
Speak to your mortgage lender if you think you might fall behind
This part is really important. If you have any doubts about whether you’ll be able to continue paying – say, if your redundancy pay doesn’t look like it will stretch very far – then you must speak to your lender.
The chances are, they will be happy to come to some sort of arrangement to help you. They may agree to give you a mortgage holiday if you have had a good history of meeting your mortgage payments in the past, and you have a relatively low loan-to-value. Each lender will have different criteria that you have to meet, but they should find a way to help you if you’ve been a reliable mortgage holder.
Remember, it will be marked on your credit history and the interest you don’t pay will still gather on your mortgage balance while you’re not paying. So, you may end up with slightly higher payments after your mortgage holiday.
Even if you have struggled to repay in the past, it’s still important you speak to your lender, as they will try to help you. If you’ve worked for your employer for less than two years but more than one month, they only have to give you one week’s notice if they make you redundant. If you don’t have any savings, try to speak to your lender as soon as you know you’re losing your job so you don’t start to fall behind.