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Falling behind on your mortgage payments is known as being in default. If you can't agree on a revised payment plan with your bank or lender, they can take legal action to repossess your home. This could include:
- issuing a default notice
- filing a statement of claim
- a court order to evict.
A default notice can impact your credit rating and could reduce your capacity to borrow funds in the future.
The process to repossess a home usually starts with a default notice. This can be sent the day your payment is overdue, but is most often sent when your payment is 90 days or more overdue.
Lenders generally avoid sending a default notice, preferring to come to some sort of revised repayment schedule wherever possible.
If it does go ahead, the default notice gives you 30 days to make any missed payments.
You can still apply for a hardship variation during the default period.
Statement of claim
It is important to get legal advice if you’ve been served with a statement of claim. You can find a Community Legal Centre near you at Community Legal Centres NSW.
If you didn’t pay the amount owed within the 30-day default notice period, or haven't made arrangements to do so, your bank or lender can file a statement of claim with the courts.
You’ll have 28 days to respond to the claim. Your options include:
- paying the amount owed
- filing a defence
- lodging a dispute with the Australian Financial Complaints Authority.
If you don’t respond within the 28 days, a default judgment may be made against you without you being notified. Having a judgment made against you can affect your credit rating.
If a default judgment is made against you, your bank or lender could then apply for a court order (also known as a writ) to take possession of your home.
When a court order is made, you’ll receive a notice to vacate from the sheriff. This includes the date that the sheriff intends to carry out the eviction and change the locks.
If you receive a notice to vacate, you’ll have a minimum of 30 days to leave your home. You may be able to apply for an extension of time or delay all action in certain circumstances, including if you're in:
- the process of selling the property
- refinancing talks with other lenders
- severe financial hardship.
You may need to provide evidence if you're applying for an extension or a delay.