First step - speak to your lender
Many home loan providers, including banks and non-bank lenders, announced measures to support eligible customers impacted by coronavirus who may fall behind on their mortgage repayments. These measures included:
- repayment deferrals of up to 6 months
- fee waivers
- offset account withdrawals at no cost
With the initial 6-month period over, many lenders are contacting borrowers to discuss options, including the possibility of an extension.
If you've not been contacted, it's very important to get in touch with your lender to find out what your next steps could be.
Some income protection insurance policies cover home loan repayments if you’ve lost your job, as well as if you're unable to work due to sickness or injury.
Contact your insurance provider to check your level of cover.
Changing the terms of your home loan
In times of financial difficulty, changing the terms or conditions of your home loan could be worth considering.
One option is a hardship variation. This is a letter you submit to your lender that sets out your reasons for wanting to:
- change the terms of your home loan, or
- temporarily pause or reduce loan repayments
To apply for a hardship variation, contact your bank or lender to find out what's required. Use the template in the link below to help write your letter. In most cases you'll need to include:
- the details of your home loan
- why you’re having trouble making payments
- how long you think you'll have trouble making payments
- how much you can afford to pay on your loan
Once you've submitted a hardship variation letter and any documents requested, you'll generally get a response within 21 days.
If your hardship variation application is refused
Your bank or lender must provide a reason if your hardship request is refused. If you disagree with the outcome, you should contact their internal dispute resolution team in the first instance.
If you can’t come to an agreement with your bank or lender, get in touch with the Australian Financial Complaints Authority. The AFCA can provide guidance on:
- independent dispute resolution
- what to do before making a formal complaint
- how to submit a complaint
With the original 6-month mortgage deferral period now ending for borrowers impacted by coronavirus (COVID-19), you should get in touch with your lender to discuss what your options are
If you choose to defer your home loan payments, the interest that builds up in the period you defer will usually be added to the home loan, so it may take you longer to pay off.
Talk to your bank or lender to find out:
- what their policy is and how any deferral might impact your loan balance before making any decisions
- whether deferring home loan payments will put you in arrears, as this can affect your credit rating and ability to borrow in the future
If you default on your home loan
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 (For more details, see section 1 First step - speak to your lender).
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, or haven't made arrangements to do so, within the 30-day default notice period, 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.
Debt agreements and bankruptcy
It’s important to get financial and legal advice if you:
- have been served a bankruptcy notice
- are considering filing for bankruptcy
- are entering into a debt agreement
If you’re evicted, you’ll still need to pay back your home loan.
The bank or lender will usually try to sell your property to recover the amount they're owed. You’ll also be responsible for paying costs involved in selling your home.
If you still owe money after the sale, your bank or lender may try to recover the remaining amount of the loan by:
- making a claim to sell your other assets, or
- starting bankruptcy proceedings against you
You also have the choice of:
- applying for a debt agreement, or
- filing for bankruptcy yourself
A debt agreement is a formal arrangement between you and your creditors to pay back the debt over a certain period of time.
A debt agreement is not the same as a debt consolidation loan or an informal repayment plan.
Once you've signed a debt agreement:
- it's listed on your credit report for at least 5 years
- you're listed on the national personal insolvency index for at least 5 years
- you’ll have to tell new credit providers about the debt agreement if you owe more than the credit limit
- you may not be able to work in certain jobs
Bankruptcy is an official declaration that you’re not able to pay your debts. You can file for bankruptcy yourself, or a creditor can start bankruptcy proceedings against you. In either situation, a trustee:
- will be appointed to manage your bankruptcy
- can sell any assets you have to help pay your debts
A bankruptcy usually lasts for 3 years and 1 day from the day it was filed. If you earn over a certain amount during that time, you may need to make compulsory payments to your trustee.
Being declared bankrupt means you won’t have to pay back most of your debts. However, you'll still be responsible for some debts, including:
- child support and maintenance
- government student loans
- court imposed penalties and fines
- debts you incur after your bankruptcy begins
Being declared bankrupt stays on your credit report for 5 years. Additionally:
- you're listed on the national personal insolvency index permanently
- you can’t travel overseas without permission from your trustee
- you can't be a director of a company without court permission
- you may not be able to work in certain jobs
Help with managing your finances
Make a budget
If your income stops or is reduced, it may be hard to meet financial commitments.
Budgeting is a practical way to see where you spend your money, and can help to:
- get a clearer picture of your overall financial position, which can make you feel more in control
- prepare you for unexpected expenses
- spot areas where you can cut back spending and save money
Get financial support
Due to the large number of people currently seeking help, service centres and phone lines have long waiting times. You can lodge your intention to claim online through your MyGov or Centrelink account.
There is a range of temporary payments available for people affected by coronavirus (COVID-19). The type of support you may get will depend on your situation. They include a:
- coronavirus supplement
- household economic support payment
- crisis payment
Other measures to help those affected by coronavirus (COVID-19) include:
- early access to your superannuation
- reducing the superannuation minimum drawdown rates for account-based pensions
Get help with utility bills
Some energy providers are extending payment periods for customers who have been financially affected by coronavirus (COVID-19). Talk to your energy company about your options if you’re having trouble paying the bill.
There a number of savings available to eligible customers that can help reduce energy bills, including rebates for:
- retail customers (if you get your bill from an energy retailer)
- on supply customers (if you get your energy bill or invoice from a strata manager or community village operator)
Mental health support and legal advice
As well as your financial situation, coronavirus (COVID-19) can also impact your physical and mental wellbeing.
Depending on what discussions you're having with your bank or lender regarding changes to your home loan repayments, you may also need to obtain legal advice.
Mental health support
- professional help, advice and referrals to local mental health services at NSW Mental Health Line on 1800 011 511
- support services at Relationships Australia or 1300 364 277
- help with depression and anxiety at Beyond Blue or 1800 512 348
- telephone and online counselling service for men at Mensline on 1300 789 978
- find mental health resources at Head to Health
- find a social worker through Services Australia
- free, confidential phone and online counselling anytime for young people aged 5 to 25 at Kids Helpline on 1800 551 800
Beware of scammers. Banks and other home loan lenders would never ask for your account or personal information to be shared over the phone, in an email or SMS.
If you've received something suspicious or think you’ve been scammed, report it to Scamwatch.