If you're slipping behind on mortgage repayments, don't panic — call your lender straight away and work out a plan. Below I explain how lenders typically respond in Australia in 2026, the realistic options you can pursue, and practical steps that improve your chances of keeping the house or limiting losses.

Quick reference

Short list to keep handy:

  • Contact your lender's hardship team as soon as you miss a payment — lenders must consider hardship requests under the National Consumer Credit Protection Act 2009.
  • Ask for a hardship variation and get it in writing — your lender has 21 days to reply from your request or from when you supply any extra information.
  • Get free help: National Debt Helpline 1800 007 007 (Https://ndh.org.au), AFCA 1800 931 678 (Https://www.afca.org.au), Services Australia (Https://www.servicesaustralia.gov.au).
  • Options include refinancing, switching to interest‑only, extending the loan term, a repayment deferral, selling, or — as a last resort — lender repossession (mortgagee sale). Costs and timing vary by lender and state; read the fine print and get independent advice.

Prerequisites — what to have ready

Before you call, gather your documents — lenders want facts, and being organised makes the process quicker and more likely to succeed.

  • Loan account name and number, loan start date and current balance.
  • Recent bank statements — at least three months, and ideally six months if your income has been variable.
  • Proof of income: current payslips (last two to four), Centrelink statements or your latest tax return (ATO notice of assessment).
  • A simple budget showing current income, all expenses, and any other debts (credit cards, personal loans, HECS/HELP), plus regular outgoings like school fees and child support.
  • Exactly what you can realistically afford to pay each week/fortnight/month and for how long — lenders prefer a clear, realistic figure.

Check whether you qualify for short‑term help from Services Australia, such as JobSeeker or crisis payments — processing times vary, so apply early and factor any delay into your plan. See Servicesaustralia.gov.au.

Step‑by‑step: what to do if you can’t pay

  1. Act straight away — call your lender. Don’t wait until several payments are missed. One missed repayment is manageable. Letting arrears build narrows your options and increases fees. Ask for the hardship team or hardship officer and say you need a hardship variation under the National Consumer Credit Protection Act 2009.
  2. Explain your situation clearly. Say why you can't pay, how long the problem will last, and what you can afford. Lenders expect documentation — give payslips, Centrelink letters or bank statements. If you’re self‑employed, provide BAS statements or recent business bank statements and tax returns.
  3. Ask about specific options. Common lender responses include:
  • Some lenders offer a temporary repayment pause, typically around 3–6 months; interest usually still accrues, so ask how interest will be charged before you agree.
  • Switching to interest‑only payments — often for short periods (3–12 months under hardship arrangements), which lowers monthly payments but doesn’t reduce principal.
  • Reduced repayments for a set period — a structured temporary lowering of repayments to what you can afford.
  • Extending the loan term — spreads repayments over a longer period to reduce the regular payment amount, but increases total interest paid over the loan life.
  • Splitting the loan — moving the loan into an interest‑only portion and a principal‑and‑interest portion.
  • Refinancing with another lender — shop around, compare break fees and new loan costs; remember new lenders do full affordability checks.
  1. Get the agreement in writing. If the lender agrees to a variation, ask for written confirmation showing how long it lasts, how interest will be charged, and whether the loan term or repayments change. Keep copies — they matter if there’s a later dispute.
  2. If the lender refuses or you’re not happy, escalate. Ask for an internal review or a final answer. If you get a final decision you think is wrong, contact AFCA — the Australian Financial Complaints Authority — on 1800 931 678 or Afca.org.au. AFCA handles complaints free of charge.
  3. Consider selling or renting the property. If the hardship is long term, selling may protect your credit and reduce total losses. You can also consider renting out the property to cover repayments — check your loan contract for owner‑occupier restrictions.
  4. As a last resort, prepare for repossession. If all options fail, a lender may start enforcement action. That can include issuing a default notice and, depending on the loan terms and state law, taking possession and selling the property (mortgagee sale). The lender must follow legal steps — they generally have to provide default notices and allow time to remedy the default before selling.

What happens in a mortgagee sale

When a lender sells a property to recover the loan, they aim to get a fair market price. Any shortfall after sale — the sale price minus the outstanding loan, interest and sale costs — can be claimed from the borrower. Sale costs can include legal fees, advertising, auction costs, valuation and property management fees — these can add up to thousands of dollars.

If the sale leaves a shortfall, the lender may pursue a deficiency debt. In some cases, guarantors or co‑borrowers may be liable too. Bankruptcy is a separate legal process and has long‑term consequences for credit, so it’s only for after other options are exhausted.

Where to get help — contacts and resources

Free or low‑cost services:

Tips to improve chances of a good outcome

  • Be proactive — call early. Lenders are more flexible before arrears build.
  • Stick to what you can afford — lenders take realistic, evidence‑backed plans more seriously.
  • Get independent budgeting help from a financial counsellor — it's free and confidential via the National Debt Helpline.
  • Compare offers before refinancing — a cheaper rate can still cost more if there are exit or application fees.
  • Keep records of all contact with your lender — dates, names, outcomes and copies of agreements.

Common mistakes to avoid

  • Ignoring calls and letters — silence often speeds up enforcement action. Answer communications and stay engaged.
  • Accepting a verbal promise — always get changes in writing.
  • Relying on a short‑term fix without a long‑term plan — interest accrual or extended terms can leave borrowers worse off.
  • Missing Centrelink or tax lodgement deadlines — missing documentation can slow hardship assessments and entitlements.

Related Articles

If mortgage repayments are slipping, act fast: call your lender’s hardship team, gather documents, and ask for a hardship variation under the National Consumer Credit Protection Act 2009. Use free services — National Debt Helpline, AFCA and Services Australia — for budgeting, dispute help and income support. Keep records, get any agreement in writing, and seek independent budgeting advice before agreeing to anything that extends your debt for years.

This article was created with AI assistance.