Out of work should I pay my mortgage?Nicholas, 60, is a paralegal who has worked for corporations and law firms in New York City for 30 years. Two decades ago, he bought a house in the woods in Pennsylvania's Delaware Water Gap region, commuting two hours by bus each way to his job.

In April 2007, his longtime employer, a pharmaceutical company, cut 10,000 jobs -- including his -- in the first of several waves of layoffs. A month later, Nicholas found contract work with a legal temp agency. Although he logged more hours, his annual income fell from $74,500 to $66,000.

In December 2007, Nicholas' doctor told him he could no longer delay necessary prostate surgery. Nicholas returned to the temp agency in May 2008, but 12 months later, the agency declined to renew his contract. Since then, he has worked on various temporary jobs, but the last ended in April 2010, and he has been out of work ever since. "There are so many unemployed attorneys that they are taking the paralegal positions," he says. "I never thought I'd be out this long."

Nicholas is focusing his job search in Pennsylvania, because New York firms typically want him to work overtime -- which he wouldn't mind if there was a bus that could get him home. "I'm at the mercy of public transportation," he says. (Firms have eliminated car services for paralegals on the late shift, a standard perk when the economy was flush.) Local employers have suggested Nicholas has too much big-city experience and would be bored with their assignments.

He has looked at other professions, applying to substitute teach based on previous experience in New Jersey, where he's still certified. But he would have to take classes to get certified in Pennsylvania (and commuting to sub in New Jersey would eat up his paycheck). He even tried for a position as a veterinarian technician, since he had several years of litigation experience that involved working with vets. He hasn't heard back. "I'm pulling rabbits out of a hat, but they're all dead," he jokes.

Making do with unemployment benefits and savings, Nicholas tries to keep a sense of humor as he sends out countless resumes and trolls LinkedIn for networking opportunities. He takes breaks from the job search by walking his leash-trained, 15-pound tuxedo cat, Skyler. "He keeps the neighborhood in stitches," says Nicholas.

Uncertain about the future, Nicholas is thinking about paying off the $42,500 mortgage on his house, which is valued at about $105,000. He has $35,000 in savings and a life insurance policy he can cash in for $11,500. He also has $109,000 saved in various retirement plans. "I'd be cash poor, but I'm concerned about keeping a roof over my head," he says.

The Answer: In Uncertain Times, Cash Is King


My advice to Nicholas is don't pay off the loan. Though it might make him feel more secure, in reality, it would make his position more precarious. For the unemployed, cash is king. Nicholas needs to keep his assets easily accessible to cover basic costs, especially if his extended unemployment benefits run out before he finds a job. Moreover, home values were devastated during the crash, and it's unclear how close to the bottom of the market we really are, so paying off the mortgage means pouring cash into an investment that could have further to fall.

In addition, Nicholas needs cash on hand to maintain his property. Last year, for instance, he had to replace the roof. If he paid down the mortgage and faced a similar emergency without adequate cash, he'd be hard-pressed to find a lender willing to let him borrow against the home's equity since he's unemployed. He also has annual property taxes and homeowners' fees of about $3,500. When he does find a job, Nicholas may want to establish a home equity line of credit as a low-interest emergency back-up.

"Next month, I will be out of work a year and a half, which is absolutely crazy," he says. "But I know a lot of people in the same boat."

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jhon.morinho

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July 16 2013 at 1:17 PM Report abuse rate up rate down Reply
vinnyo

Check out another website http://www.RETIREREPORT.com for daily information from around the country/world.

October 12 2011 at 3:21 PM Report abuse rate up rate down Reply
vinnyo

Check out another website http://www.RETIREREPORT.com for daily information from around the country/world.

October 12 2011 at 3:19 PM Report abuse rate up rate down Reply
Amanda

So for now, I'm sitting tight. I have about $400K in IRAs, $97K in taxable savings. The house is worth about $298K. By being extremely frugal (got rid of cable, cell phone and other luxuries) i have been largely unemployed for 2 years and have yet to dig into personal savings.I am a 27 years old doctor, mature and beautiful.and now I am seeking a good man who can give me real love ! You know any millionaire club can be better ?...My friend just met a millionaire man on (--WёalthУFlirt.ČОM---.---)-it's the most effective site in the world to connect with, date and marry successful, beautiful people.-Meanwhile, . It's worthy a try. You do not have to be rich or famous.
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October 03 2011 at 1:03 PM Report abuse +1 rate up rate down Reply
Renata

"Next month, I will be out of work a year and a half, which is absolutely crazy," he says. "But I know a lot of people in the same boat."


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September 29 2011 at 3:31 PM Report abuse rate up rate down Reply
Renata

For the unemployed, cash is king. Nicholas needs to keep his assets easily accessible to cover basic costs...
www.gayperutravel.org

September 29 2011 at 11:41 AM Report abuse rate up rate down Reply
pobrien145

Unless he has health issues he should buy term life insurance then cash out his whole life policy. He will save a alot by just doing that. Maybe right a budget he can live to. Just a couple of suggestions

September 26 2011 at 6:48 PM Report abuse rate up rate down Reply
Fern

I was laid off in Sept. 2009. Since then, I worked for the Census Bureau, worked a 3.5 month contract job, worked another contract job 5 weeks and done a lot of freelance work. My benefits haven't yet run out. My only debt is my $28K mortgage (6% interest). I was regularly prepaying it and preferred doing that instead of paying $3-4,000 to refinance again. I'm 52. I had recently decided to pay off my mortgage and then the stock market tanked, and since i'd be selling mutual funds to do so, decided I, don't want to sell at a loss. So for now, I'm sitting tight. I have about $400K in IRAs, $97K in taxable savings. The house is worth about $298K. By being extremely frugal (got rid of cable, cell phone and other luxuries) i have been largely unemployed for 2 years and have yet to dig into personal savings.

September 25 2011 at 10:00 PM Report abuse rate up rate down Reply
Mark Davidsaver

He's probably paying at least $2500 a year to maintain his current home. Effectively he is using the interest on his entire savings to maintain his home (see http://www.yourmoneypage.com retirement and home sections). Why not sell the home and rent. It frees up his savings.

September 23 2011 at 4:27 AM Report abuse rate up rate down Reply
wealth

In less than 24 months he qualifies for a reverse mortgage so he should put up two years on the mortgage and focus on getting some revenue. he can by a car for under 10 grand at the car auction and he will be in good shape. No need to sell a house that he won't have to pay for in two years.

Mark
www.managerofwealth.com

September 22 2011 at 2:48 PM Report abuse rate up rate down Reply