How can you pay your home loan after losing your job?

Job loss can lead to significant financial stress, especially if you have a mortgage to take care of. But just because you’ve lost your job for now doesn’t necessarily mean you have to lose your home too. There are several steps you can take to keep on top of your home loan while you hunt for a new role.

Read on to learn more about how you can continue to pay for your mortgage after experiencing job loss.

Covering your mortgage when dealing with job loss

Unfortunately, job loss is an unavoidable part of life for many Australians. If your income stops suddenly due to job loss, you’ll need to reevaluate your expenses, including your loan repayments. Here are a few steps you can take to help you manage your situation.

Draw on your emergency funds

Do you have some rainy-day funds lying around in case of emergencies? Job loss is the perfect excuse to hook into your savings to see you through until you land a new position. Most people don’t have a bottomless pit of emergency funds to tap into, so it’s important to be mindful of this cash and use it as a temporary solution.

Create a budget

When money’s tight, it can often help to create a budget to give you a clear idea of where your money is going. Review your budget to identify non-essential expenses that can be reduced or eliminated. From here, you can redirect these funds toward your mortgage payments.

Seek government assistance

Look into any government assistance programs or unemployment benefits that you may be eligible for. These can help provide temporary financial relief. Check the Services Australia site for more information on what you can do if you’ve lost your job.

Check your insurance

If you have life insurance, it can be worth checking your policy to see if you’re entitled to any form of coverage in the event of job loss or redundancy. Some Life Insurance policies may offer some form of Income Protection, which may provide temporary relief while you look for another job.

Access super

In extreme cases, you might be able to access your superannuation early on compassionate grounds, helping to prevent foreclosure on your home. That said, tapping into your super can eat away at your retirement savings, so it should be used as a last resort.

Contact your lender

Be sure to inform your lender about your job loss as soon as possible. They may be able to work with you to find a temporary solution to help you manage your payments.

Can you pause your home loan repayments?

In short, yes, your lender may provide you with the option to pause your loan repayments to help you get back on your feet.

If you’ve recently lost your job, you could be more likely to experience financial hardship. Your bank or lender will have a hardship team dedicated to helping their customers navigate difficult times.

If you’re struggling to stay on top of your repayments after losing your job, it’s important to reach out to your lender for help as soon as possible. Depending on your individual circumstances, your lender may:

• Reduce your repayments for a period of time
• Pause your repayments for a month or two
• Develop a unique plan for you to follow

What happens if you can't pay your mortgage in Australia?

If you can’t cover your mortgage repayments, you could find yourself in trouble. While each lender has their own process for dealing with loan defaults, here’s a quick look at the steps involved.

Step 1. Missed payments

Your lender will usually contact you to inform you of the missed payment and discuss your situation. This is often done via phone, email or letter. If payments continue to be missed, the mortgage will go into arrears. The lender may charge late fees or penalty interest.

As we’ve already touched on, many lenders offer hardship assistance programs for borrowers experiencing financial difficulties. These programs might include temporarily reducing or pausing payments, extending the loan term, or restructuring the loan.

If you’re responsive to your lender or alert them to your situation ahead of time, they’re more likely to work with you to create a repayment plan to catch up on missed payments over time.

Step 2. Default notice

If your loan arrears aren’t addressed, the lender may issue a default notice, giving you a specified period (often 30 days) to pay the overdue amount or make other arrangements.

Step 3. Legal action

Failure to respond to the default notice can lead to legal action. The lender may begin the process of repossession, where the property is taken and sold to recover the outstanding debt.

Step 4. Sale of property

In some cases, selling the property voluntarily can be a better option than forced repossession, potentially allowing you to pay off the mortgage and avoid a negative impact on your credit rating.

It can be difficult to reach out for help if you’re experiencing financial difficulties, but it’s important to seek help sooner rather than later. If you’ve lost your job or you’re struggling to keep up with your mortgage repayments due to other reasons, be sure to get in touch with your lender. They’ll work with you to understand your situation and provide the best possible solution.

At Unloan, we understand that there may be times when you need a little extra support and care. With this in mind, we created a list of external support services you can contact for help when you’re doing it rough. Whether you’re after free financial advice, government services or help with family or domestic violence, we hope you can use this resource to find a service to support you in your time of need.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking independent taxation and financial advice before making any decision based on this information.