Home Loans

Your home loan is usually your biggest, most expensive and highest priority debt.  If you are temporarily unable to meet your normal loan repayments, you have the right to ask your lender for hardship assistance

Information on this page:
Please click the links below to visit each section

Download PDF

COVID-19 Changes: For more information about managing your home loan if you have been financially impacted by the pandemic see COVID-19 changes: Home loans

This page outlines the steps you can take if you’re struggling to make repayments on your mortgage.

Your home loan is usually your biggest, most expensive and highest priority debt.  If you are temporarily unable to meet your normal loan repayments, you have the right to ask your lender for hardship assistance.  You should talk to your lender as soon as possible to discuss your options.

At the bottom of this page we explain when a lender can commence legal proceedings to take possession of your home and what you can do if you are in this situation.

If you complete the steps below and your problem still hasn’t been solved, or you’re feeling overwhelmed, call us on 1800 007 007 to speak with one of our financial counsellors.

Steps to take if you’re struggling to pay your mortgage

01

Work out what you can afford to pay

If you’re struggling to pay back money you owe, the first thing to do is to work out what you can actually afford to pay by doing a simple budget. How to work out what you can afford to pay.

If you are unable to meet your normal loan repayments, the first thing to do is to work out what you can actually afford to pay by doing a simple budget. How to work out what you can afford to pay.

If you can afford to pay something
Start paying the amount you can afford and get in touch with your lender straight away. Ask your lender for hardship assistance and to put a repayment arrangement in place that you can afford

If you can’t afford to pay anything
Call us on 1800 007 007 straight away for advice.

TIPS

  • Check whether you can get a utility relief grant to help pay your utility bills and free up money for your mortgage repayment.
  • Find out if you can get food, transport, phone or chemist vouchers from an emergency relief service near you; this will also help free up money for your mortgage repayment. You can find your closest service on the Ask Izzy website.

02

Understand your options

Depending on your circumstances, your lender may be able to offer options that will help reduce your repayments for a period of time until you are able to return to normal repayments.  For example:

  • Extending the length of the loan so that your repayments are lower
  • Converting the loan to interest only payments for a period of time
  • Reducing your repayments to the minimum monthly repayment amount
  • Accessing money you may have available in any redraw of your loan
  • Consolidating debts for example: personal loan, credit card and home loan debts into one loan, so that your total repayments are lower
  • A combination of these and other measures.

If you temporarily cannot afford to make any repayments, for example for three months, your lender may consider a repayment deferral if you can demonstrate you will be able to resume normal repayments at the end of the deferral period.

 

    LONG TERM FINANCIAL HARDSHIP

If your financial hardship is not temporary and you will not be able to reasonably repay the loan, you can ask your lender for hardship assistance that gives you time to sell your home. Sometimes selling your home might be the best option.  If you are in this situation, call and speak to one of our financial counsellors on 1800 007 007 to independently explore your options.

03

Contact your lender and ask for the ‘hardship department’

The sooner you contact your bank or lender, the better.

Ask to speak with the hardship department and explain that you are in financial hardship. The hardship department staff will explain your options and offer a hardship variation.

The contact details of banks’ hardship departments are available on the Australian Banking Association’s website under Financial Difficulty.

Make sure the hardship variation or repayment arrangement is:

  • Affordable. If it isn’t affordable, don’t agree: insist on a repayment amount that you can afford.
  • For an appropriate term. Don’t agree to a short-term arrangement if you know you need several months.
  • Complete and covers what happens at the end of the term. If you know you won’t be able to afford higher than normal repayments when you get through your temporary difficulties, specifically ask for any arrears to be added to the loan and for the term of the loan to be extended.
  • If your financial hardship is not temporary and you will not be able to reasonably repay the loan you can also ask for financial hardship where you negotiate time to sell your home. The other option is to surrender your home to the lender. If at all possible sell your home yourself as this usually means you will get a better price.

The Mortgage Relief Scheme

The ACT and Queensland have government-funded mortgage relief schemes for home-owners struggling with short term, severe financial hardship. In these schemes, interest-free loans are offered to cover arrears and some future payments.

Each of these states/territories has their own strict eligibility requirements. For more information, contact:
Department of Revenue (ACT)
Department of Housing (QLD).

We recommend you speak to a financial counsellor if you believe you may benefit from one of these schemes.

04

If you can’t agree, you can dispute it

If your lender will not agree to a repayment arrangement for your home loan, you can have that decision reviewed by the Australian Financial Complaints Authority (AFCA). This is a free and independent dispute resolution service.   (There is more information about how to lodge a dispute here –  Dispute Resolution – Step 2).

If your lender is threatening legal action call us immediately and speak to one of our financial counsellors for advice on 1800 007 007.

05

Speak to one of our financial counsellors

If you’re feeling overwhelmed and need some help to deal with your financial hardship, you can speak with one of our financial counsellors.

Financial counsellors aren’t judgmental about your circumstances – they’re here to offer you free, confidential and independent advice and assistance.

To speak to a financial counsellor you can:

  • Call the National Debt Helpline on 1800 007 007 – open Weekdays from 9:30 am to 4:30 pm.
  • Use our live chat service by clicking the chat icon in the bottom right corner of your screen. Live chat is available 9:00 am to 8.00 pm weekdays. If you send a message outside these hours a financial counsellor will get back to you.
  • Make an appointment to see a financial counsellor in your local area – Find a local Financial Counsellor.

What should I do if?

Can I lose my home?

Yes, it’s possible to lose your home if you don’t keep up with your home loan repayments. Your lender can sell your home to recoup the money they lent you. This is called repossession.

Most lenders are keen to work with customers who are having trouble before things get to this stage. That’s why it is so important to contact them early.

However, if you won’t be able to afford your mortgage repayments for the foreseeable future, then you may need to consider other options, such as getting a boarder or selling your home.

Can I use my superannuation to pay arrears?

There are very limited circumstances when you can access your superannuation early.  You may be able to access some of your super on compassionate grounds for specific expenses, so you don’t lose your home. Specific expenses could include home loan repayments or council rate arrears.

Any super you withdraw for this purpose will be taxed and this will reduce the lump sum.  The tax rate varies depending on your age and other factors.  On average, tax of approximately 22% will be deducted from your lump sum super withdrawal if you are below the preservation age.

If your financial hardship[1] is temporary, you may be able use a lump sum from your superannuation to pay your mortgage arrears. It is tempting to view this as a quick fix for mortgage arrears, but remember that you are using your future retirement income on an asset that you may lose if you cannot return to making your normal loan repayments. We recommend speaking to a financial counsellor before going down this path.

Remember, when you are behind on your mortgage, you need an agreed repayment arrangement in place while you apply to access your super. Otherwise there’s a risk that legal proceedings will start while you’re waiting for approval from your superannuation fund.

Read more about using your superannuation to pay mortgage arrears.

[1] You are considered to be in financial hardship if you are willing to pay your bills but have insufficient money to do so.

Do I have insurance?

Check your loan agreements to see if you have consumer credit insurance for events such as a job loss or an illness. It’s possible that a policy is included in your loan contract, and the premium may even have been included in the loan.

Note that ‘mortgage insurance’ or ‘lenders mortgage insurance’ is something different. Although you pay for mortgage insurance, it’s there to protect your lender in case you default.

Make sure you also check the insurance in your superannuation – you may have ‘Income Continuance’ or ‘Income Protection’ cover you can claim.

KNOW YOUR RIGHTS

ABOUT REPOSSESSION

A lender can only start legal proceedings to take possession of your home under certain circumstances.

If you have received a statement of claim or summons, or the default notice has expired, lodge a dispute with the Australian Financial Complaints Authority. The lender can’t continue with any enforcement (such as repossessing your home) while the Australian Financial Complaints Authority considers your dispute. You need to lodge before the lender gets judgment to give yourself the best chance to save your home. You can still lodge a dispute after a court judgment but your options will be limited.

 

The lender must send a default notice

A lender can only start legal proceedings to take possession of your home if:

  • you’re in default of the mortgage by failing to make a repayment or repayments (or in breach of another condition of the loan); and
  • they have sent you a default notice in writing asking for payment of the outstanding amount; and
  • you haven’t made the requested payment (and your normal scheduled repayment) within 30 days (or the time specified in the notice)

default notice is a letter required under the credit laws. If your loan is covered by the credit laws (a home loan or investment property loan) then you must be sent a default notice.

A default notice must:

  • specify the default (for example, the amount you are behind in repayments)
  • specify the action required to fix the default
  • give you a minimum of 30 days to fix the default including any scheduled repayment (and specify when it must be fixed)
  • that the repossession and sale of the mortgaged property may not repay the entire debt
  • include a notice giving information about your right to give a hardship notice (ask for a repayment arrangement on the grounds of financial hardship) and your rights to lodge a complaint in the Australian Financial Complaints Authority.
  • tell you what may happen if the default is not fixed within the time set which includes:
    • commence court proceedings
    • take possession of the security property
    • make the whole debt payable
    • list a default on your credit report

If you get a default notice get advice immediately. If you are in financial hardship tell the lender. If you believe you do not owe part or all of the debt get legal advice.

You may receive a letter of demand both before and after the default notice. A letter of demand is a letter from the creditor demanding repayment of the debt and notifying you that they may sue you in court. Letters of demand are not court documents.

 

When the lender starts court proceedings

You will be served with a statement of claim or summons from a court. You will be given a limited time in which you need to respond. You should consider lodging in the Australian Financial Complaints Authority as soon as you receive the statement of claim or summons. This will stop the lender getting judgment while your dispute is being considered by the Australian Financial Complaints Authority. Call us immediately to discuss your options.

In most circumstances, the lender will seek a court judgment for:

  • possession of your home and/or
  • payment of the amount outstanding

The lender may take possession without going through the court (but this usually only happens when the property is vacant).

 

Repossession and selling your property

If the lender obtains a court judgment the next step is for the lender to seek an order to take possession of your home. You will be given notice and a sheriff will come to your home and change the locks.

Your lender will then sell your home by either auction or private sale.

In selling your home, the lender must:

  • exercise the power of sale in good faith, having regard to the interests of both parties
  • take reasonable steps to obtain the best possible price consistent with its right to realise the security
  • tell you when your home has sold and let you know how the sale have been used
  • give you any money that is left over (if there is any) after the loans have been repaid

The lender:

  • can charge legal and sale costs for the legal action and sale of your home. These costs will be added to the loan.
  • does not have to keep you informed about the progress of the sale of your home
  • can set a low reserve in an auction (as a low reserve does not mean the property will be sold for that amount)
  • does not have to spend money to improve your home for sale (but they may need to pay for maintenance costs)
  • does not have to maintain the existing tenants or find new tenants
  • can insure your home and charge you for that insurance
  • can use the money from the sale of the property to reduce other loans you have with the same lender

If you believe the lender has acted unfairly in selling your home you can complain to the lender. If that dispute is not resolved you can complain to the Australian Financial Complaints Authority. For more information see Australian Financial Complaints Authority Approach to Mortgagee Sales.