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 help.

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 request.

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 mortgage

Talk to the Australian Financial Complaints Authority (AFCA)

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 resolution scheme.

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 bills.

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 mortgage repayment

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 contact.

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 urgently.

If you haven't already done so, you can lodge a dispute with the Australian Financial Complaints Authority (AFCA) - 1800 931 678.

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 out

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 process.

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 trouble with debt.
  • 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 refinancing.
  • 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 super early.  

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 action.

Related links

Last updated: 01 Nov 2018