How can I pay my mortgage if I’m made redundant?

If you are made redundant, you are likely to have a number of concerns, many of which will be related to money. Since it makes up such a large part of your outgoings, the question of how you will meet your mortgage repayments is likely to be top of the list.

The good news is that if your income is suddenly drastically reduced, due to redundancy or another reason, there is help available.

This is what we suggest:

Do you already have protection in place?

Absolutely the first thing you need to do is check whether you took out any protection when you applied for your mortgage in the first place. This might be a mortgage payment protection plan or similar. If you did, dig out your policy and work out whether you meet the requirements to make a claim.

Speak to your mortgage lender

If you didn’t have protection in place, don’t panic! There are other options available to you. Your mortgage lender is the next port of call. They will have seen many people in this situation and have ways to offer support. After all, it’s in your lender’s best interests to help you out in the short term and get you on the road to being able to make regular payments once again.

One common support mechanism mortgage lenders offer is a mortgage payment holiday. This might also be called a mortgage freeze or deferral.

Mortgage payment holiday: the basics

By offering you a mortgage holiday, your lender agrees that you can stop making mortgage payments for a limited period of time. In cases of redundancy, for example, this can make a huge difference to anxiety and mental wellbeing while you look for another job and try to work out what comes next.

Most lenders will only agree to periods of three months at a time, although you can request a six month break.

Are there any downsides to a mortgage payment holiday?

It’s important to remember, that even though you are not making payments during the holiday window you will still be charged interest on the loan. This means that the amount you are paying for your mortgage will continue to increase overall.

Plus, a payment freeze or deferral could actual impact decisions made about your eligibility for future loans. So it is important to think about, and ask about, the long-term implications of this decision. That said, if you’re struggling to make ends meet in the short term this could be a useful option.

Check out whether you’re entitled to government benefits?

If you lose your job through redundancy, there may be government schemes in place to help you. Options such as Universal Credit, Jobseekers Allowance, Tax Credits or Housing Benefit. You can use these online calculators to help you work out which benefits you may be entitled to.

But what if you’re already on benefits when you’re made redundant? In that case you may be able to get help from the government, Support for Mortgage Interest (SMI).

What is Support for Mortgage Interest?

If you qualify for Support for Mortgage Interest, the government will pay the interest on up to £200,000 of your mortgage. If you receive Pension Credit this reduces to £100,000 of your mortgage.

How is it SMI paid?

Payments for SMI are usually made by the government directly to your lender. This is not a gift, it is a loan. The idea being, when you sell your property or transfer ownership you will need to repay these payments with interest.

It’s worth noting also, that SMI can only help to pay the interest payments on your loan, it cannot be used for capital repayments. And when calculating how much will be paid, the government do not look at the interest rate you’re actually paying on your mortgage, they use a standard interest rate.

How quickly can I get access to SMI?

The good news is that if you are on Pension Credit you can get the help straight away. For other applicants, though, there is a 39-week waiting period from the time you claim SMI until when your first payment is made. This is around nine months, or nine assessment periods if you are on Universal Credit.

Maximise income and outgoings

The roof over your family’s heads is so important, it’s crucial you do everything you can to save it. Once you’ve exhausted protection and benefit options, have a look at other income and outgoings.

Interrogate your monthly budget and work out where you can cut costs. Have a clear out of the kids’ toys and your own belongings and try to sell whatever you can on eBay or via a garage sale or car boot.

And consider taking up some temporary work while you look for your next position. Hopefully this is only a short-term situation and you’ll soon be back on your feet and  meeting those payments with ease.

Don’t be afraid to seek help

If you’re still concerned about your finances and don’t know where to turn, there are a number of national charities and organisations that can help. from a debt charity such as StepChange and National Debtline, for example, both offer free and confidential debt advice.

We offer a number of insurance and protection policies alongside mortgage products. Talk to one of our Protection Experts today to find out more.