Your mortgage is up for renewal, but you’ve just lost your job. What now?

One of the hardest experiences to go through in life is losing your job. It comes with stress, uncertainty, and many difficult financial decisions. 

That stress can only be made worse by the prospect of losing your home. What happens if you need to renew your mortgage during this time?  

The good news is that your home is most likely going to be safe, provided you’re still able to work and actively looking for employment. 

Renewing your mortgage while unemployed 

Mortgage lenders don’t require proof of employment to renew a mortgage. “The only reason they would check something is if you defaulted or you haven't been making payments,” says Leah Zlatkin, LowestRates.ca mortgage expert. “Then they may have a reason to look into you.”  

Therefore, it’s important to prioritize your mortgage payments if you are unemployed to ensure this doesn’t happen.   

However, if you’re in a truly dire situation — like a career-ending disability or a complete inability to work again — you may need to consider selling your home. In this case, says Zlatkin, “You probably shouldn't have a mortgage.” 

Can you renegotiate your mortgage rate while unemployed? 

The bad news, unfortunately, is that you may have to wait until you’re working again to shop around for a new mortgage rate. A different provider will require proof that you have a steady income.  

“If your lender is offering you really terrible rates on your renewal and you can't go anywhere else because you're not going to qualify anywhere else, I would highly recommend choosing a variable product with your existing lender,” says Zlatkin. “Then move to a different lender once you find new employment.” 

While it might seem counterintuitive to opt for a fluctuating interest rate when your income is unpredictable or non-existent — particularly in a rising-rate environment like the one we’re in now — it’s less costly to abandon your mortgage if you’re on a variable rate. 

Zlatkin recommends avoiding a fixed-rate mortgage during periods of unemployment because you would pay a higher penalty for breaking it, which can make it more of a financial burden if you decide to switch payment structures.  

She notes that most people who have a mortgage and are making regular payments will likely have savings. If you are still looking for employment, this is the time to use that emergency fund to float your mortgage for a while until you’re in a more stable financial position. 

Can I defer payments or refinance my mortgage? 

You cannot defer payments if your mortgage is up for renewal — this would require disclosing that you lost your job and makes it unlikely that you will get your mortgage renewed. But if you are in the middle of your term, this is an option to ease your financial burden.  

“If you're calling the lender before you have that deferral situation, they're more likely to play ball with you because they want to help you,” says Zlatkin. “They don't want to foreclose on you.” 

Refinancing your mortgage is much trickier because it’s similar to applying for a new mortgage. Axess, a Canadian mortgage law firm, suggests taking a hard look at your finances and credit score, and assembling any possible sources of income to show that you could make the payments.  

However, without a job, you may have to face the possibility of waiting until you can provide proof of financial income. 

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