What to do when you miss a mortgage repayment

couple-meeting-with-brokerBy acting fast after missing a repayment, you increase your options and the opportunity to fix the situation.

You may think that missing a mortgage repayment is the worst thing that could happen, but the good news is that your lender is more than happy to help. The earlier your notify your lender the more options the have to help you.

General Advice

This article is provided as a guide only. It is of a general nature and does take into consideration all your financial information when considering hardship. Before acting on any of the information here you should consider your own objectives, financial situation and needs.

Things you need to know when skipping a home loan repayment:

  • An arrears management fee may be applied.
  • A dishonour fee may also be charged and applies to periodic payments, direct debits and cheque payments from your account that are rejected due to insufficient funds.
  • A default interest rate may be charged on overdue payments, which is higher than your mortgage interest rate.
  • Your home loan may be withdrawn, forcing you to settle the full amount of the mortgage in cash.
  • Enforcement costs will be passed onto you such as legal fees and court documents.

What should you do if you miss a repayment?

Contact your lender

The first thing you should do is contact your lender. They will then assess your situation and ask you:

  • Why you missed a repayment
  • How to plan to pay it back and where will the money come from
  • How they can help you to get you back on track.

You might find it stressful and embarrassing to talk to your lender about why you missed a repayment, but remember that financial difficulty can happen to anyone. Taking action means that you are trying to fix it as soon as possible and is a positive sign in the eyes of the lender.

Every lender has different policies, but most will only take action if they've seen that a borrower has missed more than two repayments, but this will depend on your loan-to-value ratio (LVR):

  • High LVR loans over 80% - generally two missed repayments
  • Low LVR under 80% - generally three or more missed repayments.

The big four banks and most other lenders have hardship programs for borrowers who are experiencing financial difficulty. It is important that you talk to your lender and work with them, instead of looking for a quick exit strategy. You should also avoid borrowing more money or using a credit card, as you'll only compound your debt and your struggles to repay it.

Struggling with repayments? Refinance to a cheaper rate and lower your costs.

Rates last updated May 28th, 2018
$
% p.a.
Offset account
Split account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Maximum Insured LVR Amount Saved Short Description
3.69%
3.69%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.67%
$0
$0 p.a.
80%
A mortgage with a competitive variable rate, limited fees and plenty of flexibility.
3.69%
3.69%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.64%
4.03%
$0
$395 p.a.
80%
New borrowers or refinancers from another lender get a discounted rate with this package loan.
3.62%
3.62%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).

Compare up to 4 providers

Aussie Home Loans Logo

Enter your details below to receive an obligation-free quote from an Aussie home loans expert today

finder.com.au guarantees the privacy and security of your details

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the finder.com.au privacy policy and the Aussie privacy policy.

Aussie Home Loans is both a lender and a mortgage broker, and offers a range of services.

  • FREE Suburb and Property Report with every appointment.
  • Access 3,000+ loans from over 20 lenders.
  • Get expert help with your loan application, including paperwork and eligibility.
  • Over 1000 brokers who are able to help you in your local area.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 5 years running (2013-2017)

What do lenders offer if you fall into financial hardship?

Lenders have unique departments within their organisations that are there to assist borrowers when they are going through a period of financial hardship.

Below are a selection of the lenders that offer some form of financial hardship assistance.

What if you miss more than one repayment?

If you miss more than one repayment you will need to explore your options:

  • Make a repayment arrangement. Call for financial guidance and work out a new budget. Ensure that your new budget is realistic. If you've noticed that you cannot afford to make the repayments you may want to consider selling your home.
  • Call or write to the lender. Make a note of the phone conversation and ask to be transferred to the financial hardship team. Show them your repayment arrangement and ask for the term of the loan to be extended. If you're uncomfortable with calling your lender, you can write a letter requesting financial hardship and attach all the required documentation.
  • Complete a Statement of Financial Position. This is a document that allows your lender to see if whether or not you can afford your home loan repayments. You should complete this document with a financial counsellor because you need to include your essential expenses. If your State of Financial Position includes expenses that your lender might deem unnecessary, you need to question whether you can do without them. However, if your Statement of Financial Position shows that you can't afford your repayment arrangement, the lender may reject the application.
  • Change loan terms. If the problem is short term, the lender can help by changing the terms of the loan. If the problem is long term, consider selling the home or refinancing
  • Talk to the ombudsman. Borrowers not satisfied with the lender's decision can contact the Financial Ombudsman Service or the Credit and Investments Ombudsman
  • Downsize to a cheaper home. If repayments are no longer affordable, one option is to consider moving to a more affordable house. Another option is to rent until finances are sorted
  • Create a budget to repay. Take the time out to create a budget and carefully think about where your expenses are going. Getting a clear picture of this will help you manage your debts. Read our guide on the elements of a budget.
  • Ask for outside assistance. Need extra guidance? Contact an Australian financial counsellor for free and confidential help.
NSWConsumer Credit Legal Centre1800 007 007
TASConsumer Credit Helpline1800 232 500
VICMoneyhelp1800 007 007
WAConsumer Credit Legal Service(08) 9221 7066
NT and QLDNational Legal Aid(03) 6236 3813

What will your lender do if you continue to miss repayments?

There are processes your lender must follow before they can take legal action against you, which is why the sooner you approach your lender, the better. Your lender will send you a series of notifications and will try to repossess your home. It is important that during this time you seek out as much legal advice as you can. Below is the usual process:

Letter of demand
  • A notice that you've missed a repayment
  • You may have to negotiate a repayment plan or apply for a hardship variation
  • If you disagree with the debt, or you do not owe the debt, you have a right to dispute it
  • Try and catch up with your payments
Default notice
  • 30 days notice to catch up on your repayments
  • You can pay the amount that is owed plus your usual repayment, or take a repayment holiday for up to six months
  • Your lender cannot take recovery action against you until they take steps as well
  • You may need to consider selling your home
Statement of claim
  • Fixed number of days allocated for you to repay the debt
  • Lodge a dispute with the Financial Ombudsman Service
  • Consider getting free legal advice
  • Consider selling the home
Apply for writ
  • Your lender will apply for an order to take possession of your home
  • Try to get free legal advice urgently
Sheriff letter
  • Your lender will send you a letter telling you when a legal official will come and change your locks
  • Continue getting free legal advice
Eviction
  • Your lender will send another legal official to evict you
  • Continue seeking legal advice

Do I need to consider selling my home?

If you find that you won't be able to afford your repayments in the next couple of years, you may want to consider selling your home. The best time to sell your home is before your lender takes any legal action.

Deciding whether to selling your home is most difficult when:

  • You're unemployed but trying to find a job
  • You are ill and trying to recover but don't know when you'll fully recover
  • Waiting for a payment for another reason

In these situations, one set of options to consider is:

  1. Make a repayment arrangement for up to six months and show it to your lender
  2. If by the end of the six months you still cannot make the repayments, consider the option of selling your house.
  3. Go back to the lender and negotiate another arrangement on the basis that you are selling your home. Give copies of evidence that you are selling your home to the lender. Include the contract with your real estate agent if you have one.
  4. If you sell the house, you need to tell your lender as soon as possible and provide evidence.

What's next?

In the event that you sell your home, your lender should postpone all proceedings. This is because your loan balance should be paid off and such a sale allows you to avoid late and legal fees. Your credit rating shouldn't be affected in this circumstance. If this is not the case, get free legal advice or contact the Credit and Investments Ombudsman for information.

Use the equity left in your property to make other housing arrangements. If money is still tight, you could decide to rent or find temporary accommodation. If you have a stable stream of income again, it may be a good idea to purchase a cheaper home and make new financial arrangements with a lender.

Depending on how much equity you have, you may need to make more affordable housing options. There are some Government initiatives that may help;

  • NSW New Home Grant Scheme. Offers a grant of $5,000 towards the purchase of a new home up to $650 000 in value. The grant also applies to homes off the plan with a value of up to $450 000.
  • Sale of Home to Tenants Scheme. If you're staying within a NSW public housing complex and want to purchase the home, you can apply. Sales are subject to whether the property will be used for any future developments.
  • Exemption from transfer duty. An exemption from transfer duty is available for tenants of Housing NSW and community housing providers if you purchase more than a 25 per cent share in the property.
  • Australian Government Assistance. Under the Housing Affordability Fund, there are a few opportunities to be eligible for a rebate on the purchase price. To be considered, you need to have a low to moderate income. To date, this is only restricted to housing at Lake Macquarie.

Marc Terrano

Marc Terrano is a content marketer manager at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

Was this content helpful to you? No  Yes

Related Posts

Home Loan Offers

Important Information*
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupied Variable P&I Rate — borrowing $700,000 or more

Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)

New borrowers or refinancers from another lender get a discounted rate with this package loan.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.

13 Responses

  1. Default Gravatar
    wayneApril 29, 2018

    having a terminal ill wife and my wage wont cover the house payments and every thing else but have been told that some times a bank will buy back half the house to lower repayments is this true

    • Staff
      JeniApril 30, 2018Staff

      Hi Wayne,

      Thank you for getting in touch with finder.

      As a friendly reminder, while we do not represent any company we feature on our pages, we can offer you general advice.

      In this page, it states that if your Statement of Financial Position is accepted and your repayment arrangement is successful, then it is essential you stick to it so you don’t fall behind on repayments again. If your State of Financial Position includes expenses that your lender may think are not necessary, you need to question whether you can do without them. However, if your Statement of Financial Position shows that you can’t afford your repayment arrangement, the lender may reject the application. If you find that you won’t be able to afford your repayments in the next couple of years, you may want to consider selling your home.

      Since you mentioned about a bank would buy back half of the house to lower repayment, I suggest that you contact your lender/bank directly regarding this matter or the Credit Ombudsman Service if you are not satisfied with your lender’s decision.

      Upon going through the page, it only mentioned that you must keep reaching out with your bank/lender when you missed your mortgage repayments due to some inevitable circumstances and they might help you make a repayment plan or apply for a hardship variation.

      I hope this helps.

      Have a great day!

      Cheers,
      Jeni

  2. Default Gravatar
    ElleDecember 1, 2017

    I really need a breather with my mortgage and want to know the best way to approach things.

    My work dried up, leaving me without income currently. I have been very actively trying to find employment – with no luck so far. I am also a sole parent who does not receive child support (father lives overseas).

    My Sydney home is worth 2million and I owe <$245k, so the repayments are $1100 per month.

    If I tell the bank I am currently unemployed, will they work with me to give me some time (at least 3 more months) to find employment? It's now Dec 1st and already I notice the job market is slowing down for the xmas period.

    Does anyone have any experience successfully getting a 3 month pause on monthly repayments?

    • Staff
      JoanneDecember 1, 2017Staff

      Hi Elle,

      Thanks for reaching out.

      There are some options available like mortgage holidays or applying for financial hardship with the lender.

      A mortgage payment holiday is a temporary period of time where in your lender or bank will not require you to make your regular monthly repayments. This can be very helpful for many people in a variety of situations, as it can free up your cash flow and reduce the amount of money you need to pay out that month. Different lenders have different set of rules so it would be best that you check with your lender first if this type of option is available. You may read further on this page as it discusses mortgage holiday in detail.

      In addition, lenders have unique departments within their organisations that are there to assist borrowers when they are going through a period of financial hardship. You may also reach out to your lender if they do have a financial hardship assistance team you can speak with. This page has provided a guide above the steps you can take to proceed with the process.

      Hope this helps,
      Joanne

  3. Default Gravatar
    SmittybApril 27, 2016

    I lost my job at the end of February and after no luck in finding anything suitable I decided to put my property up for sale and leave Sydney. I am currently under severe financial hardship. I owe $193000 and houses in my area are selling around the 600k median. I approached my bank of 15+ years to 1st to access my super to pay all outstanding debts ie home utilities car and to eat. Then ask for an overdraft to do all necessary clean up and to start moving stuff out of the house and survive during the period of the sale. My way of thinking was if I was making 350k+ from the sale they would be more than interested in keeping my business as I have been a good customer. Not so. The way I have been treated is worse than appalling. I have pretty much hocked everything I own..Also being fed false promises from 2 bank managers saying that it was a no brainer until the decision to give me the overdraft.. Then I get totally ignored and treated like a beggar. I have told them that I am in need of medical treatment as I have gout on my spine I’m at a whits end and absolutely no patience left as there treatment of me is putting me under so much more duress. I have even supplied them with a copy of my home sale contract but I’m getting shoved from one useless person to another and has been going on for weeks.

    • Staff
      BelindaApril 27, 2016Staff

      Hi Smittyb,

      Thanks for reaching out. I’m really sorry to hear about how you’ve been treated.

      The Australian Investments and Securities Commission (ASIC) Money Smart program offers free online financial and legal counselling which you might find useful. You can jump online and get personal advice about the best way to manage your existing debts. They also offer a financial counselling hotline and crisis support.

      You can take some steps to show your bank that you’re trying to improve your financial situation. For instance, you can demonstrate that you’re actively seeking work and you can also show your financial discipline even by depositing small amounts of money into a high-interest savings account.

      We have some useful tips about debt reduction and management strategies on this page. If you have several loans or debts, you may want to consider consolidating them.

      Also, you may want to apply for a Centrelink benefit during the interim.

      Before taking any action, I strongly suggest that you seek advice from a licensed financial and/or legal professional to help you take back control.

      All the best,
      Belinda

    • Default Gravatar
      SmittybApril 27, 2016

      Thanks for your quick response Belinda..Much appreciated))

  4. Default Gravatar
    LeighMarch 11, 2016

    What can the bank do to get their money back? EG Access your super,Access bank accounts with a different banks,Force you to sell property mortgaged with another bank etc. If you default on a land only loan. I am thinking of defaulting on a land loan as I cannot sell the land and do not wish to pay anymore. There was no leaders insurance on the loan. All advice gratefully accepted.

    • Staff
      BelindaMarch 14, 2016Staff

      Hi Leigh,

      Thanks for getting in touch.

      If you believe you’re going to default on your home loan, then you should contact your lender right away and tell them that you are experiencing financial difficulty. Depending on the lender and the structure of your loan, you may be able to apply for a repayment holiday which could reprieve you from your mortgage commitments for a given period of time.

      Otherwise, you should visit the Australian Securities and Investments Commission (ASIC) website as they have free financial and legal counselling services online.

      In some instances, a lender can take possession of your property/land and sell it if you fail to meet your mortgage repayments as outlined by your mortgage contract. However, the lender has to issue a notice identifying that you are in default of the loan and that you have a certain amount of time to resolve the situation. Read more about mortgagee in possession sales here.

      It’s advised that you seek financial and legal advice to fully understand your options.

      All the best,
      Belinda

  5. Default Gravatar
    KathrineMay 5, 2014

    Hi Shirley,

    I have been trying to find out if ING DIRECT.have a system put in place if you become out of work can you freeze your payments for a few weeks.

    Thanks
    Kathrine

    • Staff
      ElizabethMay 5, 2014Staff

      Hi Kathrine,

      Thanks for your comment.

      If you are having trouble making your home loan repayments you can get in contact with ING DIRECT’s hardship team and they will be able to make some suggestions for you. Their number is 1300 349 166.

      Hope this has helped.

      Thanks,

      Elizabeth

    • Default Gravatar
      MargaretJune 17, 2017

      I got fired from my job as a CNA for over 7 years because I filed a workmans compensation case due to a job related injury. I’ve been seeing a doctor for 2 years and I just lost my disability. Now my house payment is 17 days late. What would be a good idea to do?

    • Default Gravatar
      JonathanJune 18, 2017

      Hi Margaret!

      Thank you for your comment.

      First, we would like to appreciate your effort in trying to regain your finances in order.

      Whenever clients encounter financial difficulties, the first people to talk to is your creditors. You may contact your lender for a payment plan that can be squeezed into your income. Next is if you’re not able to form a mutually beneficial arrangement, you may consult a Credit Counselor which you can find on this page.

      Your other option is to get free legal advice or contact the Credit and Investments Ombudsman for information.

      Hope this clarifies,

      Cheers!
      Jonathan

Ask a question
Go to site