If you're struggling with your home loan repayments, there is help available. Act early to give yourself the best chance of keeping your home or selling it on your terms.
If you receive a default notice, do not ignore it. Talk to your lender or get free legal advice immediately.
All lenders have hardship programs to help customers in tough times.
Talk to your lender to discuss your options. You may be able change the terms of your loan, or temporarily pause or reduce your repayments. This is called a hardship variation.
Apply for a hardship variation
- Contact your lender's 'hardship officer'.
- Give the details of your loan (account name and number, and the amount you pay each fortnight or month).
- Say that you want to change your loan repayments because you are experiencing hardship.
- Explain why you are having difficulties making payments. Tell them how long you think your financial problems will continue and how much you can afford to repay.
The Financial Rights Legal Centre sample letter generator can help you create a letter to send to your lender.
Your lender must write to you within 21 days to let you know the outcome of your hardship request. If they ask you for more information, they must respond within 21 days from when you provide it.
If your lender agrees to a hardship variation
- Negotiate an amount that you can realistically afford to pay each fortnight or month.
- Make a plan to get back on track. Look at your budget to see if there's anything you can cut back on or manage differently.
- Talk to your utility providers' hardship teams about paying electricity, gas, phone or water bills in instalments. Or shop around to see if you can find a better deal.
- If you need help, contact a financial counsellor. Call 1800 007 007 or visit National Debt Helpline.
If your lender refuses a hardship variation
Your lender must give a reason if they refuse your hardship request. If you're not happy with their response, contact their internal dispute resolution team.
If you can't reach an agreement, contact the Australian Financial Complaints Authority (AFCA) to make a complaint and get free, independent dispute resolution.
If you've fallen behind on your mortgage because of sickness or an accident, you may have income protection insurance that can cover your repayments. You may have this insurance with your super.
Consider selling your home
If your circumstances are unlikely to improve, you may be better off selling your home.
This is a tough decision to make. But it's better to sell your home yourself than have a lender take possession and sell it. You're likely to get a better price and you'll avoid paying any legal costs passed on by the lender.
Another option is to live somewhere else and rent out your house until you can afford the repayments again.
If you decide to sell
Let your lender know if you decide to sell. They may ask for proof. This could include a copy of the contract with your real estate agent, the contract of sale and any advertisements.
Steps a lender can take if you're behind on your mortgage
Lenders have to follow a specific set of steps before they can take your home.
1. Default notice
Your lender can send you a default notice the day your repayment becomes overdue. However, they may wait until your repayment is 90 days or more overdue. The default notice will give you 30 days to make the payments you've missed plus the regular repayment on your loan. You can still apply for a hardship variation at this stage.
2. After the 30 day default period
Your lender can serve you with a Statement of Claim or a summons. This is the of start legal action against you to claim the whole amount of your home loan.
You have a set number of days to file a defence or lodge a dispute with a dispute resolution scheme. The number of days is different in each state or territory.
If you do nothing, your lender can take action to repossess your home.
Get legal advice if you receive a Statement of Claim.
If your lender gets a court order to repossess your home they will send you a Notice to Vacate or a Sheriff's letter. Your lender may also get a Warrant for Possession. A sheriff (or bailiff) will come to your home, evict you from the premises and change the locks.
This does not release you from the obligation to pay your loan. Your lender may sell your home and recover any outstanding balance by taking further legal action. This can include making a claim to sell your other assets.
Look after yourself and get help
If you're feeling overwhelmed by money issues, it's okay to ask for help. See urgent help with money for help with food, housing and bills, and emotional support.