If You Have Student Loans You Can Suspend Your Payments
Federal student borrowers payments are now suspended until 2021, and even better, interest wont continue to accrue during this time. Given that this is automatic, you wont need to contact your servicer, unless you have questions. Those on automatic payments should find that those have been temporarily postponed. Take advantage of this by utilizing that money originally going toward your student loan payments to help shore up your expenses.
This doesnt, however, apply for private student loans, though some lenders and servicers may be able to work out a payment plan if youve lost your job.
Banks across the country are also taking steps to help mitigate the financial impact from the virus.
From waiving fees and minimum balance requirements to letting individuals withdraw their certificates of deposit early without penalty, this may help free up extra cash.
Some lenders, such as Marcus by Goldman Sachs, are even allowing borrowers to suspend their loan payments. A number of to customers on monthly payments too.
Even if you dont work with a national bank, its worth reaching out to ask, ONeill says. If you do need to borrow money, your bank can likely work out an option for you to take out a small-installment loan with a flexible and low-interest payment plan.
Its always a good idea to just find out what they have available, she says.
Can You Refinance While On Unemployment
In most cases, you cannot refinance your house if you are unemployed.
For tax purposes, unemployment income is counted as wages. But it cannot be used for refinancing except in the narrow case of seasonal workers.
Seasonal workers as the name implies work only during certain times of the year. For example fishermen who fish during a particular season, ski operators. Even Santa Claus can be considered a seasonal worker
A seasonal worker, can document that they received jobless payments consistently for at least two years and be considered for a mortgage. And the lender must verify that the seasonal income is likely to continue. Refer to the specific guidelines for Federally backed loans by Fannie Mae and Freddie Mac.
ACTION STEPS: If you are a seasonal worker, get the previous 2 years tax returns from the IRS. Make sure it documents the seasonal payments received.
Alternative Sources Of Income
For many people, a regular job is not their primary source of income. There can be several alternative sources of cash inflow. If you are retired, you may have a steady pension income that can cover the mortgage costs. You may be earning good returns on your retirement fund or other investments, and if the fund is large enough and has a conservative risk profile, a lender may consider it as a steady source of income. If you are an independent consultant, freelancer, or are engaged in any other form of self-employment, you might be able to convince the lender about your repayment ability.
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Be Flexible About New Opportunities
Workers may also want to find ways to broaden their skill sets, whether thats by taking on new training or learning something new, Hamrick says. All of this could set them up for success once the outbreak does subside.
We know that some businesses are benefiting from increased demand while others are being devastated by the changes, Hamrick says. Those who have the ability to make a career pivot or take advantage of new opportunities will fare the best. Still, others may opt to seek education or skills enhancement during this time of tremendous challenge.
But this may also include practicing ingenuity with the skill sets you already have, ONeill says. A hair cutter at a salon near her Florida home, for example, is visiting clients directly in their homes after the hair parlor shut down.
There are opportunities if people can turn their skill set into a side hustle or find something else where employers are hiring, she says.
Federal Loans: Dont Refi If You Dont Have A Job
For the unemployed, federal loans are far superior to private student loans. Borrowers that refinance their federal loans convert the debt from federal to private. While this move might make sense in certain circumstances, it is a bad idea for the unemployed.
One of the greatest perks of federal student loans is that borrowers can make payments based upon their income. For the jobless, it means that $0 payments can be made until they secure an income. Recently unemployed borrowers should get enrolled in an income-driven repayment plan as soon as possible so they can get their monthly payments lowered to $0.
In fact, the federal protections are so good that many borrowers with federal student loans choose not to refinance them at a lower interest rate because they would rather have income-driven repayment available in case they lose their job or become underemployed.
Regardless of how low the interest rate may be on a refinance loan, unemployed borrowers should never refinance a federal loan.
Benefits Of Refinancing A Mortgage During Retirement
When you make the decision to refinance your home mortgage, youll generally obtain a lower interest rate or you may choose to lengthen your loan term. These two factors will make your monthly mortgage payments lower, which also lowers your expenses and creates more space in your budget.
Another strategy that may be beneficial to your budget is to refinance your mortgage into a shorter loan term. This will increase your monthly mortgage payments but youll pay off the loan sooner. Youll also benefit from paying less interest over the life of the loan.
Be sure you have the extra income to afford this larger mortgage payment until the end of the loan term. Once youve paid off your mortgage, your monthly expenses decrease substantially, so you wont need as much retirement income in your later years.
You may also find refinancing your mortgage during retirement to be beneficial if you already have a lot of equity in the home. You can opt for a cash-out refinance, which allows you to take out that equity as cash. During the refinancing process, you may also benefit from a lower interest rate with your new mortgage terms.
When you cash out the equity in your home, you have a lump sum of money that can help ensure your retirement funds last. However, its important to use this money wisely for your living expenses or to re-invest. Spending it frivolously leaves you in the same financial situation and you may need to look into additional sources of income to stay afloat.
Have Alternative Forms Of Income
When you submit a loan application, lenders normally ask to see copies of your most recent pay stubs. However, you can qualify for a loan based on other types of income such as pensions, alimony or even investment earnings such as dividends and interest. If you are relying on non-employment sources of income, you may have to provide your lender with copies of your tax returns and other supporting documentation such as dividend income statements and rental property lease agreements. Your lender uses this information to determine the percentage of your income that goes toward monthly debt payments. Lenders refer to the resulting calculation as your debt-to-income ratio. You cannot get a loan if your various income sources leave you with too little cash to cover the proposed loan alongside your existing obligations.
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What You Should Consider
Before you start to look for a lender, keep in mind the following considerations:
- Your unemployment income doesnt count. Most lenders dont consider unemployment payments as income for a loan, which means youll need to prove you have another source of income to secure your refinance.
- Length of unemployment matters. If youre on sabbatical or on temporary leave, providing your lender with proof of when youll return to steady employment can improve your chances of getting a new loan.
- Refinancing may not be the solution. If youre unemployed, consider your lifestyle and financial needs. Know whether refinancing is the best solution for your financial situation. Understanding your refinancing objectives will help you make the right choice.
- Refinancing isnt free. Refinancing means taking out a new loan to pay off your current mortgage, which comes with closing costs. So make sure to weigh those expenses against the amount youd save every month on your mortgage payments.
Unemployed And Need A Car Loan: What Makes It Hard To Approve
Being unemployed and still having a requirement for a car isnt odd in the pandemic era. A lot of people lost their jobs and are unemployed for a long time. Therefore in this situation, asking for car loans for unemployed can bring you few benefits :
You can keep your valuables secured to your bank as collateral.
Unemployment car loans can give you the lowest interest rates
You can enjoy flexible repayment options that will be perfectly affordable
You dont need to drain your savings to get a car and you can afford it with easy monthly installments
Long story short, before you read further, its good to know that getting car loans for unemployed isnt easy enough. The reasons, as per the lenders perspectives are too relevant to be understood.
So, have a look at what makes it hard for a lender to approve you for car finance for unemployed:
- Employment status as a matter of income:
In the loan market, lenders usually prefer financing cars for those with a stable income and other assets as collateral. This is because it assures them from the borrowers side to be repaid for their loans in the future. Thus, before approving car loans for unemployed, lenders take a thorough check over your employment status, income, and similar assets.
- Employment status as a source of financial assets:
How Long Do You Have To Wait After You Get A Job After Being Unemployed Before You Can Apply For A Mortgage
The answer to your question depends on how long you were unemployed, how long you were working before you lost your job and how long you have been at your current job.
Lenders typically require a one-to-two year employment history to qualify for a mortgage. So the first guideline you need to meet is that you worked for the required period of time before you became unemployed. Please note that full-time education such as college and military service count as employment when you apply for a mortgage.
The second point to consider is the length of time you did not have a job. Lenders usually permit a gap in your employment of up to six months as long as you can explain why you did not have a job. So if you were out of work for six months or less, you should be able to qualify for a mortgage. If you were out of work for longer than six months, you may need to be employed for a longer period of time following the break before you can apply for the loan.
We should highlight that you may be required to provide a letter of explanation that details why you were not employed and the steps you took to find a job. The lender includes this letter in your mortgage application as part of your employment history.
- Top Lenders
What Happens If You Cancel Your Loan Application
For some applicants, the strategies above may not have a positive impact on their loan application. If you find yourself in this camp, you have the option to cancel your loan application. While cancellation might be your last resort, it can save valuable time and legwork for both you and your prospective lender.
If youre thinking about canceling your application, you may wonder what consequences there may be. The good news is your mortgage application is not a binding contract. Youre free to cancel at any time. However, not all application-related fees are refundable. Depending on your lender’s policies and the timing of your cancellation, you may face one or more of the following:
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Can I Get Refinancing On My Home Equity Without A Job
With unemployment staying high since the recession, a lot of homeowners are finding it hard to keep up with their mortgage payments. A potential solution to this is to refinance your mortgage to take advantage of the current low interest rates so that your monthly payments become more affordable. Can I get refinance on my home equity without a job is a question many homeowners are asking these days. The simple answer is yes, but it is certainly not easy.
Lenders always look for evidence that you will be able to meet the monthly payments on your mortgage. Without a job and a steady income, you are seen as a risky borrower as your savings could soon run out and you may default on the mortgage. If that happens, the lender will have to foreclose, which is not a desirable situation for them as they can incur huge costs during the foreclosure process and the sale proceeds may not even cover the whole mortgage amount. That is why when you ask a lender, can I get refinance on my home equity without a job, most of them will say no. However, there are some ways in which you can get your mortgage refinanced even without a job. Here are some of the options that you can explore.
Steady Salary Is What Matters
Kris Shenton, sales manager with Equity Prime Mortgage in Crofton, Maryland, said that a new job isn’t always a hurdle for borrowers. As long as the new job pays a salary, and isn’t based solely or largely on commissions, then an applicant should have little trouble qualifying for a mortgage, as long as that new salary provides a large enough income to support the borrower’s new monthly mortgage payments, Shenton said.
Complications can pop up when borrowers are relying on non-salary income, Shenton said. Borrowers who have gone from a salaried job to self-employment will need to show at least two years’ worth of tax returns to prove that their new income is stable and not likely to disappear any time soon. If they can’t provide these returns, lenders won’t consider these self-employment dollars as part of their qualifying income.
Borrowers who switch to a new job in a different field, might give lenders some pause. But most lenders are willing to overlook the job change as long, again, as the new job pays on a salary basis, Shenton said.
“If a borrower is switching a line of work, say the borrower was a scientist and is now a lawyer, then it’s case-by-case,” Shenton said. “Though typically, so long as it is a salaried position, you are fine to get a mortgage now.”
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The Moral Of The Story
This is why its so important for you to always have an emergency fund for you to tap into. Its a general rule of thumb that you should have about 30% to 55% of your gross income saved each month.
But if that’s not possible, even being able to put away RM50 every month would already be placing you in the ‘savers’ category, according to financial advisor Yap Ming Hui.
In case of an unexpected situation, such as the loss of ones job, you wouldnt be left in such a difficult situation, where your family home is in danger of being seized.
This is also a good reminder for those who are thinking of beginning the journey to home ownership. You need to select a property that sits comfortably within your budget, and not eat up more than half of your salary in monthly repayments.
One way to do that would be to determine how much home loan you would be eligible for. Once you do so, you can then shortlist properties that fit your requirements and have the right price tag.
A Final Solution For Refinancing A Mortgage Without A Job
I ended up reaching out to my personal banker to follow up with another Citibank mortgage officer about this deal. This person followed up, checked my documents, looked up my credit score and my payment profile. The result? No refinance for me.
Without a W2 income, it doesnt matter whether I have more liquid assets in the bank than the size of my mortgage, my monthly debt payment to income ratio was over 40%.
Citibank and other banks have a strict 40-45% D/E ratio that cannot be crossed nowadays. In the good old days youd have folks coming in with stated income to allow them to borrow. In the new environment, banks check everything down to the last penny.
The interesting thing is that 44% of my mortgage payment is principal, but the bank still included my total payment as part of my debt rather than just the interest portion.
Given I had low expectations, I wasnt disappointed because I know the unemployed are dead to banks. I also didnt want to potentially go through a 100 day mortgage refinance ordeal again like I did last Spring for 0.25%.
It sucks not to be able to save additional money, but what can I do except go back to work? In fact, thats exactly what my mortgage officer somewhay smugly told me.
Sorry we cannot go through with the refinance. Thanks Sam for your understanding! Im sure were hiring. Check our career section, Ill put a good word in for you. said the mortgage officer.
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