What to do when you miss a mortgage repayment

By acting fast after missing a repayment, you increase your options and the opportunity to fix the situation.

Missing a mortgage repayment is a bad situation to be in. Your lender will expect you to make up the repayment and may even charge you with a fee. If you can make up the payment quickly and continue making future repayments then you should be OK. But if you continue missing repayments then you're in a very serious situation.

But you do have options. The important thing is to understand your financial circumstances, communicate these to your lender and find an appropriate course of action.

This page will provide clear, general advice on what to do when you miss repayments and outline helpful legal and financial services that can help you. Please remember that this information is general information only. Always seek qualified legal guidance when appropriate.

What should you do if you miss a repayment?

If you suspect you might miss a repayment, you should be proactive in contacting your lender. Call them before the repayment is due to discuss your options. Let them know the reason why you anticipate having trouble with the repayment, and explain your financial circumstances.

Your lender will then assess your situation and ask you:

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

You can still do this after you've missed a repayment, but being proactive means that you are trying to fix it as soon as possible and is a positive sign in the eyes of the lender.

Hardship assistance

Your lender doesn't want you to fall behind on your repayments. This is why lenders have unique departments within their organisations that are there to assist borrowers when they are going through a period of financial hardship. If you need help, reach out to your lender and let them know you're struggling to meet repayments. They can advise you on what to do and how they can help you.

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.

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 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 Statement 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 Australian Financial Complaints Authority (AFCA).
  • 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.

When you can't repay the mortgage

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:

  1. Letter of demand. Your lender sends a notice that you've missed a repayment. You may have to negotiate a repayment plan or apply for a hardship variation. Now is the time, if possible, to catch up with your repayments.
  2. Default notice. Your lender sends you a default notice to catch up on your repayments. A default notice will typically come if your repayment is 90 days or more overdue. The notice will give you 30 days to repay the arrears (the payment you missed) plus the regular repayment on your loan. Attached will be a form known as Form 12.
  3. Statement of claim. Your lender files a statement of claim with a court. You need to get legal advice at this point (if not sooner). You will have a fixed number of days to pay the debt. You should also lodge a dispute with the Australian Financial Complaints Authority (AFCA).
  4. Apply for writ. Your lender will apply for an order to take possession of your home.
  5. Sheriff letter. Your lender will send you a letter telling you when a legal official will come and change your locks
  6. Eviction. Finally, your lender will send a legal official to evict you from the property.

It's important to note that this does not release you from the obligation to your loan. Banks still have recourse to other assets in the event the sale of your home does not cover the balance outstanding on your loan.

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.

What happens if I lose my home?

If the worst should happen and the bank takes possession of your home, they will look to sell your home either by auction or private sale in order to recoup the cost of your home loan. Lenders will charge you for all sale and legal costs incurred during this time. When selling your home, your lender has to:

  • Take reasonable steps to obtain the best possible price
  • Exercise the sale in good faith and have regard to the interests of both parties
  • Sell the property as and when it chooses to claim the security
  • Require you to move out of the premises

Once the property is sold, the lender can still seek recourse for any outstanding amount on your home loan not covered by the sale price, though they may not choose to seek recourse. If the lender should continue to seek payment and you are unable to pay, you may find you have to file for bankruptcy (or, the lender may initiate bankruptcy proceedings against you). Bankruptcy is a very serious event, and carries serious ramifications for your financial future, so make sure you have all the information before following this route.

Services and assistance

Legal help

Each state and territory has its own laws surrounding which legal forms you'll have to file and when. While you can file these forms and appear in court on your own, you can also avail yourself of free legal aid. There are community legal centres across Australia, which you can find listed at the National Association of Community Legal Centres site. Alternatively, you can contact Legal Aid in your state or territory.

Before you begin court action, remember that if your defence fails you will have a court judgement registered against you. If this does happen, however, you can apply for a stay of eviction. This means that your eviction will be delayed to give you more time to sell your home, more time to move out or more time to refinance your mortgage, should your lender agree to this. Sometimes the lender will agree to a stay of eviction. If they don't, you can apply to the court with an affidavit explaining your circumstances.

Credit 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

Remember that there is always help available for financial and emotional distress.

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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

    • Avatarfinder Customer Care
      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?

    • Avatarfinder Customer Care
      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.

    • Avatarfinder Customer Care
      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.

    • Avatarfinder Customer Care
      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

    • Avatarfinder Customer Care
      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

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