Seeking financial assistance on how to manage your mortgage is likely one of the top concerns if you’re a homeowner who has been retrenched.
In late 2023 and early 2024, we saw a wave of tech layoffs. While the number of retrenchments in Singapore held steady in Q2 2024 (with 3,100 retrenchments compared to 3,030 in Q1 2024) and the National Day Rally 2024 announcements revealed there will be temporary financial assistance of up to $6,000 for those involuntarily unemployed, we must be prepared for the unexpected.
With such uncertainty still lingering, it’s important to prepare for how you would cope with your mortgage payments if you were forced to take a pay cut or, worse – lose your job. If this happens to you and you need advice on your mortgage, the truth is that there are no easy fixes. But here are five things you should do immediately.
5 Things to Do For Your Mortgage If You Lose Your Job
1. Cut Back On All Unnecessary Expenses
Even though the Singapore government provides temporary financial assistance, you should not rely solely on this support.
Your immediate priority should be reducing your cash ‘burn rate’, to use a popular phrase in the start-up world. How much you will have to cut back will vary depending on your individual financial situation—such as the amount of debt repayments and the strength of your support network.
But what shouldn’t vary is the process required of undertaking a comprehensive budget review of each household expense and assessing line-by-line to see where you can cut back. It could be as minor as replacing that gym membership with bodyweight home workouts and using YouTube instead of Netflix.
2. Alleviate The Pressure Using Your CPF Funds
We’ve previously discussed whether you should use your CPF Ordinary Account (OA) savings to service your home loan. The conclusion was that you can, but you have to make sure those choices are in line with your personal and financial goals.
If you’ve lost your job, ensuring financial survival and securing financial assistance are likely to take top priority, and this might mean sacrificing longer-term returns to get through the near-term storm. If you have accumulated sufficient CPF OA funds, don’t be afraid to tap into them to alleviate the pressure.
3. Discuss With Your Bank on Potential Relief Measures
It’s never easy to confront your financial distress, but it’s a needed conversation to obtain financial assistance. So, if you are struggling to make your monthly mortgage repayments, here is some advice on your mortgage: don’t be afraid to contact the bank to explore your options.
There is nothing to be anxious about – generally, the banks will want to help. They could provide financial assistance in the form of a debt management plan, advice on your mortgage, or money savings advice.
Ask them if you can renegotiate interest rates and prepare beforehand by familiarising yourself with all the reliefs the government is offering from this aspect. This could mean a loan deferment, extensions, and instalment reductions.
4. Rent Out a Room for Additional Income
We all value our privacy and convenience, but when a drastic situation like a sudden job loss occurs, having a tenant who pays rent can be helpful. Depending on where you live, renting out a room could net you anywhere from a few hundred to well over a thousand dollars in additional income per month.
Keep in mind that if you live in an HDB flat, it must be a 3-room or bigger to rent out spare bedrooms. Further, the lease period must have a minimum of six months. Do take note of the maximum number of occupants allowed in each flat type too.
5. Consider Moving To A Smaller Home
If the other options listed above just aren’t enough, then you may have to consider moving to a smaller property. Your current home may have been a good financial fit for you and your family previously, but this could very easily change the moment you lose your job and/or income – especially if your ability to finance it depended largely on your monthly salary.
This could also mean renting out your entire property and then renting a cheaper, smaller unit (or staying with friends or family). Or it could mean selling your property altogether.
Without knowing your personal financial situation, we cannot decide for you. But you can use our valuation tools and tap on the experience of seasoned property agents to sell your existing property. Just remember, this measure is meant to help you tide through a difficult time. As the job market recovers, it is always possible for you to get back on your feet.
What Happens If You Really Cannot Pay?
While the options above will help, it never hurts to be prepared for the worst-case scenarios. In this context, they would be either foreclosure or bankruptcy. Let’s briefly examine the implications of each.
Foreclosure
Foreclosure happens when the bank takes possession of your mortgage’s collateral – your property – and auctions it off to recoup the loan amount. There are rules dictating the property disposal (i.e. the auction), and any difference between the sale price and the outstanding liability (how much is owed) is due to the mortgagor (i.e. you). In Singapore, the lender must obtain a court order to undertake a foreclosure.
Bankruptcy
You can file for bankruptcy in Singapore if you are unable to repay debts exceeding $15,000. While creditors cannot repossess your HDB flat if you are bankrupt and sell it off to repay your debts, the owner of your mortgage – either a bank or the HDB – still has the legal right to foreclose. Thus, if your mortgage is the only debt you are worried about, it is rather pointless to declare bankruptcy.
Manage Your Home Loan by Refinancing Early
The truth is that while there are steps you can take to alleviate pressure from your mortgage if you lose your job, there will be no quick or easy fix. So, if you have the chance to lower your monthly mortgage payments – such as by refinancing your home loan – it might be prudent to do so.
Don’t wait until it’s too late – refinancing will be more difficult if you are trying to do so when unemployed. If you need more help, advice on your mortgage, or want objective and personalised financial assistance tips, PropertyGuru Finance’s trusted Mortgage Experts will be happy to give you a call, at no cost!
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