Behind on your mortgage

The need for speed

When you get behind on your mortgage repayments it is 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 seeking legal advice.

Here we provide you with the steps a lender can take if you fall behind on your mortgage repayments, as well as what help is available for you.

Steps a lender can take if you are behind in mortgage repayments

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.

Video: Becky is behind on her mortgage

Mortgage help - help with repayments video

See what happens to Becky when her relationship breaks up and she gets a letter from her bank about falling behind on her mortgage. She decides she needs some free legal advice.

Transcript: Becky is behind on her mortgage

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. See our guidance on what to do if you miss a mortgage repayment.

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 and if you don't have time to complain to their internal dispute resolution department, you should lodge a dispute with the Financial Ombudsman Service (FOS) - 1800 367 287 or Credit and Investments Ombudsman (CIO) - 1800 138 422.
  • 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 Financial Ombudsman Service (FOS) - 1800 367 287 or Credit and Investments Ombudsman (CIO) - 1800 138 422.

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.

Legal advice to stop you losing your home

If you are in financial difficulty and unable to meet your mortgage repayments, you can seek legal advice.

Free legal advice is available in each state and territory.

Video: Becky gets legal advice

Mortgage help - free legal advice video

Find out how free legal advice gives Becky options when she gets a warning letter from her bank. She is able to sell her house on her own terms and not on the bank's terms.

Transcript: Becky gets legal advice

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.


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Last updated: 29 May 2017