Renewing Your Mortgage When Unemployed
If you’ve recently become unemployed and aren’t sure of how it will impact your mortgage renewal, this article will be a helpful resource for you. Although losing your job before your renewal can be stressful, in most cases you will have options available to you. In addition to the options discussed here, you should also consult a mortgage broker or agent to help determine the best options for your situation.
1. Renew with your current lender
Renewing your mortgage with your existing lender is usually the easiest option, especially if your account is in good standing. Most lenders will not reconfirm the details of your employment when renewing your existing mortgage. However, if your lender does request this information at renewal, you will be required to disclose any changes; including your employment details. In some cases, your existing lender may have denied to renew your mortgage and this could be related to internal factors within the institution themselves. If renewing with your existing lender is not an option, read on!
2. Consider Alternative Lenders
If you’re currently with a Bank or Credit Union, chances are you have an “A” rate, typically available to the most creditworthy clients. If you want to move your mortgage to another “A” lender, they’ll require you to submit a new mortgage application and go through all the checks again. Being unemployed will likely make it difficult or impossible to meet those requirements, so this option is out. There are alternative or “B” lenders; these are lenders that typically have higher interest rates, but will work with clients that have poor credit or other circumstances like unemployment. Your mortgage broker or agent is a good resource to help guide you through these options, but it’s worth noting that you should have a plan to get back to the “A” side when your situation settles down.
3. Lenders of Last Resort
If you find that you are unable to renew with your existing lender or an alternative lender, you still have one option remaining. Private lenders are individuals or groups that lend their own money at higher interest rates (7-12% is typical), and tend to be more focused on the equity and property than individual. If you have at least 15% equity in your property, a private lender might be able to step-in as a lender for you. Most private lenders will lend through a mortgage broker or agent, so you will need to work with someone that has access to this type of funding. It’s important to note that you have a plan in place to pay the higher interest rate, it’s worth reading our article on when you should consider a private lender.
Although being unemployed can be challenging, it's worth noting that it does happen and there are options for you to consider. If your situation is temporary and you expect to be gainfully employed again soon, opt for a short term solution. This will help you avoid paying higher interest rates for a prolonged period and let you return to a conventional lender with lower mortgage rates.