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How easy (or hard) is it to refinance your mortgage if you lose your job?

Okay, you’ve dealt with the same bank for 30 years, never missed a payment, and always thought the bank has your best interest at heart. Perhaps they do. But just imagine you missed one or two payments on your mortgage or you tell them when you apply for a new mortgage that you just lost your job and need funds to tide you over for a few months or more. How much do you think they love you now?

At time of application, lenders require you to debt service your mortgage using the income you currently earn. What you earned in your previous job last week no longer matters to them. Even if you are approved, the lender will require you to pay for a new appraisal and legal fees all over again (even if you took your original mortgage with them just six months earlier).

Also, is your home still worth what you believe it to be? Hopefully it is, but today we are seeing evidence of slightly lower valuations that reduces the amount of mortgage clients are applying for.

How can one avoid this unpleaseant situation in the future yet have available funds in times of a crisis? Have you ever heard of a “hybrid” re-advanceable mortgage? This type of mortgage allows you the opportunity to lock in a good portion of your mortgage at a low fixed rate yet have available funds set aside, normally a line of credit, that you only pay interest on when you use it. This is much handier (and cheaper) than building up high interest credit card debt. The interest-only payment requirement can be very manageable, especially during difficult financial times. Or, feel free to lock your line of credit at deep discounted fixed or variable rates for even lower rates. No need to apply as you are in control, not the lender.

There are several lenders offering these types of products and picking the right one is definitely very important, not only for choosing the best rates, but for the features they provide. No more worries about accessing your home equity ever again!

If this type of mortgage product interests you, please give me a call to discuss further.