Problems paying your mortgage
The need for speed
When you get behind on your mortgage repayments it's time to get
serious. Give yourself the best chance of keeping your home, or
selling it on your own terms, by contacting your lender or getting
Here we provide you with the steps a lender can take if you fall
behind on your mortgage repayments, and the details of where you
can get help.
Contact your lender
If you miss a mortgage repayment, the first thing to do is
contact your lender. Your lender must assess and respond to your
Explain to your lender:
- Why you missed a repayment
- How you plan to catch up (can you find the money now or pay
back what you owe over the next few months?)
- What they can do to help you get back on track.
If you think your problems are short term and can be sorted out
in 3 months, your lender can help you by changing the terms of your
loan. You can ask them to temporarily reduce your repayments or
delay your repayments. This is called a hardship variation.
Get help with your
Talk to the Australian Financial Complaints Authority
If you are not satisfied with the lender's decision you can
contact the Australian Financial Complaints
Authority on 1800 931 678. This is a free external dispute
AFCA replaced the Financial Ombudsman Service
(FOS), the Credit and Investments Ombudsman
(CIO) and the Superannuation Complaints
Tribunal (SCT) on 1 November 2018. The
old schemes will continue to deal with complaints
received before 1 November 2018.
Claim on your insurance
If you took out unemployment, accident or sickness insurance
when you got your loan, you may be able to claim on that insurance.
Check out your policy or call your insurer to see if your policy
covers your current circumstances.
Get help from utility providers
If you are having trouble paying your water, phone, gas or
electricity bills and this is affecting your ability to pay your
mortgage, contact your utility providers. See if you can negotiate
a better repayment arrangement with them. See problems paying your
See a financial counsellor
If you are unsure what to do or are having trouble negotiating
with your lender, you can get free, confidential help from a financial counsellor.
Seek legal advice
If you are in financial difficulty and unable to meet your
mortgage repayments, seek legal advice. Free legal advice is available in
each state and territory.
Steps a lender can take if
you're behind on your mortgage
If you fall behind on your mortgage repayments, your lender must
take a number of steps before they can take formal legal action
including repossession of your home. The sooner you act in the
process, the more likely it is that you can make a repayment
arrangement with the lender and hopefully save your home.
The steps a lender can take if you fall behind on your mortgage
repayments are detailed below.
Step 1 - The lender sends you a letter about your missed
The first step a lender will take is to contact you if you miss
a repayment. This could be in the form of a letter or other
Step 2 - The lender sends you a default notice
A lender will send you a default notice, giving you at least 30
days to catch up on your missed mortgage repayments and any other
repayment that falls due within the notice period.
If you receive a default notice, you can:
- Pay the amount you owe - as well as any other
repayments that fall due in the notice period.
- Ask your lender to temporarily reduce or delay your
mortgage repayments - you should have this confirmed in
writing using a hardship variation. If you are not
happy with your lender's response you can lodge a dispute with the
Australian Financial Complaints
Authority (AFCA) - 1800 931 678.
- Sell your house - especially if your financial
situation is unlikely to improve. You will need to speak to your
lender about this decision and they may ask for copies of proof
that you are selling your property. This could include a copy of
the contract of sale and any advertisements.
If you don't take any of these steps before the notice period
expires, your whole loan will become due and payable. You lender
can start legal action to take possession of your house to sell it
to repay your home loan.
If your property is rented, vacant or undeveloped land, the
lender can take possession without going to court. If you receive a
default notice, you must act.
Step 3 - The lender takes you to court
When your default notice period expires, your lender may serve
you with court proceedings to get possession of your home so that
it can be sold. This will give you a short period of time in which
to act by either filing a defence or going to court.
If you are served with court proceedings, seek legal advice
If you haven't already done so, you can lodge a dispute with
the Australian Financial
Complaints Authority (AFCA) - 1800 931
If you do nothing, your lender can take obtain a court order to
take possession of your house.
Step 4 - The lender applies for a court order
If you have not taken any action after receiving a default
notice or being service court proceedings, the lender can apply for
a court order to enable them to take possession of your home. If
your lender applies for a court order to repossess your home, seek
legal advice urgently.
Step 5 - The lender sends you a letter telling you to move
If the lender has obtained a court order to take possession of
your home, they will send you a letter telling you to move out. A
sheriff (sometimes known as a bailiff) will come and change the
locks on the property. This letter is also known as a Sheriff's
letter, a Notice to Vacate or a Warrant for Possesion.
If you have received a letter to move out of your property, seek
legal advice urgently.
Step 6 - The lender has you evicted from your home
At this point, the lender can send a sheriff (or bailiff) to
your home to evict you and change the locks. This enables them to
be able to sell your home.
If you are evicted, seek legal advice urgently.
You should also read the Mortgage Stress Handbook for
more details on the steps lenders can take when you fall behind on
your mortgage repayments and what you can do to stop the
Traps to avoid slipping
further into debt
If you're having trouble with your mortgage, some of the
following strategies might seem like the answer, but they are
rarely an instant fix and could even make your situation worse:
- Borrowing more money or using your credit
cards - If your existing loan is already becoming
unaffordable, you don't want to get yourself deeper into debt. See
- Borrowing from family and friends - While this
may work for some people, it can add to your debts plus you'll have
the social pressure of owing money to your loved ones. See loans involving
family and friends.
- Refinancing or consolidating your debts - If
you are thinking about rolling all your loans into one, know the
risks involved and watch out for hidden costs. See debt consolidation and
- Switching home loans - Although switching
loans may save you money over time, it may take you a while to
recoup the costs of switching. See switching home loans.
- Accessing your super - You can only do this in
limited circumstances. This is a last resort and should only be
considered if it will save your home. See getting
Taking immediate action is important if you are
behind on your mortgage repayments. Talk to your lender as a
priority and get legal advice if the lender is taking legal
Last updated: 01 Nov 2018