Learn to roll with the punches
Build an emergency savings fund before you’re hit with a financial blow
For most, buying a home and shouldering a mortgage is life’s biggest and most serious financial undertaking, one subject to risks and uncertainties. When life throws a financial curveball, home ownership can be threatened.
“Job loss, illness and other life events can suddenly interfere with anyone’s ability to pay their mortgage,” says Wade Stayzer, vice-president of retail and investment services at Meridian Credit Union. “These things happen to the nicest of people. They’re unexpected.”
Losing a source of income or suddenly having expensive medical bills that force you to miss mortgage payments puts ownership of your home at risk. While it’s impossible to protect yourself from unforeseen and unfortunate events, preparing for the unexpected and knowing how to navigate a downturn is crucial.
The first steps in being prepared come before you’ve even signed the paperwork on a home purchase.
“You want to have at least three months’ worth of fallback in your bank account for mortgage payments,” says Laura Parsons, a mortgage expert with the Bank of Montreal.
“That’s for emergency funds, in case anything should happen. . . . One of the biggest mistakes firsttime homebuyers make is not being prepared for emergencies. Anything can happen to anybody at any time.”
But it’s not just about money, Stayzer says; it’s key to establish personal relationships that will support you in tough times.
“Don’t wait until you’re in trouble to build a relationship with a financial adviser or financial institution,” he says.
Fostering a good relationship with your financial adviser is a smart way to prepare against possible hardships in the future
“You should be building a relationship when times are good.”
Your financial adviser is the person you should contact not when, but before you find yourself floundering. Stayzer says it’s important to be as “proactive as you can be when, for example, you know there may be a job loss on the horizon.”
Parsons agrees. “Most people wait until they’re completely buried in trouble to ask for help. But if they see something coming that might be an issue, they should go in and talk to their banker.”
Once you initiate a conversation with your financial adviser or institution about potential difficulty in making your mortgage payments, be honest about the situation — even if it’s embarrassing or hard to talk about.
“Don’t sugar-coat it or let pride get in the way,” Stayzer says.
Being transparent about your financial situation can help your adviser figure out the best course of action in order to save your home and keep as much money in your pocket as possible.
“At the end of the day, no financial institution wants to begin foreclosure proceedings. It’s not why financial institutions are in the business,” Stayzer says.
The type of assistance available will depend on each homeowner’s unique situation. Options include lowering your monthly mortgage payments by extending your amortization period, a temporary shortterm payment deferral or other strategies your financial adviser may be willing to offer based on your history and personal relationship.
In some cases, the crux of the issue is affordability; perhaps owning the home was never truly financially feasible in the first place. In situations like that, Parsons says, it may make sense to sell the home and return to renting.
“Insurers are very, very supportive,” Parsons says.
“We don’t want anyone’s home — we want to help them.”