Home loan payments

For many people, their home is their biggest asset and their home loan is their biggest financial commitment. Most also have strong emotional ties to their home.

If you are finding it difficult to meet the repayments on your mortgage, act as quickly as you can. You may feel reluctant or embarrassed, but it is best to notify your lender as soon as possible and act quickly.

You might need some professional advice to help you at this time.  Feel free to contact MoneyHelp’s free phone financial counselling service on 1800 007 007, Monday – Friday, 9.30am – 5pm.


Assess your financial situation

Before making any decisions it’s important to get an accurate assessment of your financial situation.  You may wish to speak with a professional financial counsellor to help you assess your situation.

Please be aware that selling your home may be the best option available to you.

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Contact your lender's hardship team

It is advisable to contact your lender as soon as you find that you are struggling to make your mortgage payments.

The thought of losing your home may cause you distress and feelings of anxiety, however you need to make early contact with your lender, explain your circumstances and ask for hardship assistance.  Taking these steps will put you in the best position to determine if you can afford to keep your home.

Most lenders have a dedicated financial hardship program to assist customers who, due to changed circumstances, cannot keep up with loan payments. You need to speak to somebody in the lender’s hardship team and should make a direct request to be connected to that department when you make your call.

More information is available here: Hardship variation to your home loan; and here: Hardship programs.

Read the step-by-step guide: How to ask for a mortgage hardship variation by phone (MoneyHelp Step by step guide)(Word 28kb)

The hardship staff should explain the options available to you for managing your mortgage payments in your current circumstances.

Before you speak with them, it’s important that you have thoroughly assessed your financial situation.  It’s important to review your budget and work out how much you can afford to pay. Under no circumstances agree to pay more than you can afford.

By making early contact with your lender, you may avoid any missed mortgage payments being recorded as defaults in your credit report, and thereby protect your future access to credit.

Keep a record of all phone calls and copies of all correspondence and other documents to do with your request for a hardship variation.

Should your lender not give you an option you are happy with, you should lodge a complaint requesting that the hardship variation you want with the external dispute resolution scheme that your lender belongs to.

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Check if you have consumer credit insurance or income protection

Check your home loan contract to see if you have consumer credit insurance.

Also check with your super fund to see if you have any income protection.

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Request a hardship variation

Most home loans are classifed as consumer loans and are regulated by consumer credit laws which apply across Australia. A small number of home loans are classified as business loans, rather than consumer loans.  Business loans can be subject to the Code of Banking Practice or to other industry codes depending on whether or not your lender has subscribed to the applicable code (all banks subscribe to the Code of Banking Practice).

Under consumer credit laws and relevant industry codes, you may be entitled to have your home loan payments varied if:

  • the amount of your original loan is less than the threshold amount applicable at the time of your loan as regulated by consumer credit law; and
  • you are experiencing financial difficulty because of either illness, unemployment or some other reasonable cause; and
  • you are able to show that if your payments are varied, you will be able to repay your home loan.

If you took out your loan after July 1 2010, and you borrowed $500,000 or less, your lender will be obliged to consider your application for a hardship variation.

If you took out your loan before  July 1 2010 and you borrowed up to the threshold amount current at the time of your loan, your lender will also be obliged to consider your application for a hardship variation.

If the amount you borrowed was more than the applicable threshold amount, then your lender will be obliged to consider your application for a hardship variation in line with any applicable industry codes and its own internal hardship policies.

What to ask for

Ask your lender to vary the terms of your contract so your home loan payments are more affordable for you in your circumstances, and ask them to stop charging you interest while a hardship variation is in place. Note that your lender may be more willing to reduce payments than to stop charging interest, however it is worth asking for both.

Unless your lender specifically agrees to reduce or waive interest, a reduction in home loan payments will in the long run cause you extra interest charges because the loan term will need to be extended to allow for the reduced payments. You may be able reduce the impact of this by making additional payments to return your home loan to its original position when you are back on your feet again.

Keep your lender informed if you cannot maintain a payment plan you’ve agreed to. If you don’t do this and simply miss payments, your lender is entitled to commence legal action for repossession and sale of your home.

If your lender refuses to negotiate, you should apply to the lender’s external dispute resolution scheme, for a hardship variation.

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The Mortgage Relief Scheme

The Mortgage Relief Scheme provides short-term relief for eligible applicants. If your original loan was for less than $375,300, you may be eligible to apply for an interest-free Mortgage Relief Scheme loan from the Victorian Government. These loans help people experiencing financial difficulty keep up home loan payments. You’ll still need to pay 27% of your normal mortgage payment, and the scheme will pay the remainder to help you through this time. You may also qualify for a loan of up to $7,000.00 to repay mortgage arrears.

You will need to demonstrate that you can resume normal repayments and repay all money granted to you.

You may participate in the scheme for a maximum of two years. This may effectively reduce the stress you are experiencing because of your changed circumstances.

If you advise your lender you have applied to the Mortgage Relief Scheme, get written confirmation that they will not start any action to repossess your home while you wait for the outcome of the application.

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Refinance your mortgage

Refinancing may bring your mortgage payments under control for a short time only. Consider this option with caution. If you’re struggling to manage an existing home loan, you are likely to find it more difficult to meet repayments on a new, refinanced loan. The larger loan amount, fees and interest associated with refinancing make it a more expensive option  in most cases. Make sure you look closely at contract terms, interest rates and set-up costs. Discuss with a financial counsellor if you need help with this.

Find out more about refinancing and consolidating debts including your mortgage.

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Apply for early release of superannuation

You may be able to apply for the early release of a lump sum from your superannuation to pay your outstanding mortgage payments on compassionate grounds.

Before making the decision to access your super early, make sure you are confident that you are able to keep up the mortgage payments over the long-term.

Find out more about accessing your superannuation early to pay your mortgage.

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Sell your home

If you choose to sell your home and find more affordable accommodation, you should take steps to arrange the sale before the lender takes court action to repossess and sell your home. If you wait until you are behind with your loan repayments, you are likely to find that mounting default interest fees and charges have seriously reduced your level of equity in your home. Legal action by your lender and legal costs will seriously reduce it even further. Insist on speaking to their hardship department.

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