As someone who’s lived through a layoff; I understand first-hand the fear and frustration of being out of the workforce. You give everything you have to an employer, and they give you the boot.
There are several ways to handle this. You can get upset and live your days in misery, or you can wipe the dust off your feet and move on to bigger and better opportunities.
However, as you look for something better, reality might set in. A regular job means a regular paycheck, thus a way to cover all your monthly expenditures. If you lose a job, there’s a chance that unemployment won’t be enough to cover your major expenses, such as your mortgage loan, taxes, insurance and other loan payments.
The risk of bad credit is real when you don’t have a job. But fortunately, losing your job doesn’t necessarily mean losing your home and other possessions. There are several ways to keep your head above water like tapping your personal savings account, and the American Advisors Group recommends a reverse mortgage for those who qualify.
Whatever you do, it’s important not to panic. Fear can be paralyzing and it might trigger a hasty decision.
Here are three tips for managing financial difficulties after a job loss.
1. Ask About Hardship Provisions
The truth is, your mortgage lender doesn’t want to foreclose your property. Banks are fully aware of present economic conditions; therefore, many lenders have hardship provisions in place to help those who are unable to afford their mortgage payment. However, you need to call your lender and ask about these provisions.
You’ll be directed to the bank’s hardship department, where a representative will ask detailed questions about your situation. Depending on the circumstances surrounding payment problems, the representative may recommend a loan modification or forbearance.
A loan modification is when the mortgage lender adjusts your loan terms, perhaps lowering your interest rate and monthly payment. The goal is to create a more affordable home loan payment. With forbearance, the lender may temporarily suspend home loan payments for a period of 3 to 6 months. Other provisions are also available, such as a deed in lieu of foreclosure and a short sale. Both are options if you need to move, but can’t sell the property.
2. Get a Reverse Mortgage
If you’re over the age of 62, a reverse mortgage might be the answer to resolving financial difficulties.
A reverse mortgage is a “financial tool that allows you to access the equity in your home and convert it into tax-free cash,” says AAG Reverse Mortgage. For many financially strapped seniors, this type of mortgage is a godsend. And the best part, there are no monthly payments. The loan doesn’t have to be repaid for as long as you live in the home. Thus, a reverse mortgage is far better than any personal loan or credit cards.
Those who qualify can use funds for a variety of purposes — pay off credit card debt, make home improvements, pay medical bills and so forth.
3. Rent Out the House
In all likelihood, financial difficulties are temporary; and once you find employment, you’ll be able to maintain your expenses. Therefore, you might temporarily rent out a room in your home.
Of course, this option only works if you can accommodate a roommate. Additionally, it’s safer to room with those you know and trust. This person can split the cost of household expenses with you, ensuring that there’s enough to pay the mortgage and other expenses.
There is nothing fun about losing your job. Sure, you’ll have additional time on your hand to explore hobbies and relax. But the stress of not having adequate income cancels out any possible benefits.
Know that you can survive and overcome this hurdle — as long as you make smart financial decisions and actively seek new employment.
Featured image courtesy of Flickr – Stephan Geyer