Mortgage default in Australia: what to do if you fall behind

If you've missed a mortgage repayment, contact your lender's hardship team now. You don't need to wait for a default notice. Explain what's changed, what you can afford and whether the problem is temporary.

If you've received a default notice or court papers, get help with the deadline straight away. The National Debt Helpline offers free financial counselling on 1800 007 007. A solicitor or community legal centre can advise you about court documents and your rights.

Arrears means you're behind on a payment. Default means you've breached a condition of your loan, which can include missing repayments. There isn't a universal rule that default only begins after 60 or 90 days.

A credit-report default listing is a separate matter. Under the credit-reporting rules, it generally involves at least $150 overdue for at least 60 days and the required notices. Missed repayments can appear as repayment-history information before a default is listed.

Paying a listed default updates its status; it doesn't automatically remove an accurate listing. If the information is wrong, request a correction through the lender or credit-reporting body. OAIC explains the reporting rules.

A hardship request can also protect you from a new default listing. Generally, the lender can't list one while deciding your request or until 14 days after telling you it has refused. An exception can apply if it reasonably believes you've made the same request within the past 4 months. OAIC explains this protection.

This concerns your credit report. Keep getting help with any court or enforcement deadline while the request is considered.

For loans covered by the National Credit Code, a lender generally must issue a compliant notice giving you at least 30 days from the date of the notice to remedy the default before starting enforcement. Exceptions apply, so have the actual notice checked rather than relying on a general timeline.

Find the amount required, the remedy date and the lender's contact details. Ask whether you also need to maintain your normal repayments while catching up. Keep copies of your notice, payment records and correspondence.

Calling the bank is a useful first step, but a conversation alone doesn't resolve the default or guarantee that enforcement stops. Ask the lender to confirm any agreement and its effect on the deadline in writing. The National Credit Code sets out the notice and enforcement requirements.

Tell the hardship team why you're struggling and provide a realistic budget. A reduction in work, illness, separation or higher essential expenses can change what you can afford. You don't need a perfect explanation before asking for help.

Possible arrangements include temporarily reduced payments, a deferral or a longer repayment term. What the lender agrees to depends on your situation. Ask how interest, arrears and fees will be treated, what happens when the arrangement ends and how it will be recorded.

For loans covered by the National Credit Code, the response period depends on whether the lender needs more information. Keep the date of your request and any follow-up documents.

A request for information must be made within 21 days of your hardship notice. You then have 21 days from the date stated on that request to supply it. Ask the team to confirm the dates and what it still needs. Section 72 of the National Credit Code sets out these requirements.

Ask for the agreed arrangement in writing. If you already have a default or court deadline, get help with that deadline while the hardship request is being considered.

Ask what payment relief your lender can offer and what you'll owe afterwards. A lower payment today can mean more interest or a larger payment later. Moneysmart's mortgage-hardship guide explains where to start.

Ask for the decision and reasons in writing. You can raise a complaint through the lender's complaints process and, where appropriate, the Australian Financial Complaints Authority, or AFCA.

An eligible AFCA complaint can affect enforcement, but the stage of proceedings and AFCA's rules matter. Don't assume lodging any complaint automatically stops an eviction or replaces a court response. Get urgent legal advice if you have a judgment, possession order or scheduled eviction.

Court deadlines vary by state and document. Read the date on your papers and show them to a solicitor promptly. There is no reliable national day-by-day timetable from your first missed payment to repossession.

The National Debt Helpline's home loan guidance explains the options at different stages. Its financial counsellors can help you organise your position and communicate with the lender.

We can look at whether another loan would leave you better off, but refinancing needs a workable repayment plan. Recent arrears, your available equity, income and credit history all affect the options. A specialist loan can carry higher rates and fees, so compare the whole cost before moving.

If a new loan stretches a small debt over many more years, a lower monthly payment can still cost more overall. Our refinancing guide explains the costs to compare. Avoid making several applications while you're still working out which lenders can consider your circumstances.

If you have a default notice or court deadline, contact the hardship team and a financial counsellor first. Deal with that deadline while we look at whether refinancing could help.

If the repayments are no longer sustainable, speak with the lender and your advisers about a voluntary sale. You may have more control over presentation, agent selection and timing, but you still need agreement about any enforcement action and enough time to complete the sale.

Work out the likely sale proceeds after the mortgage, selling expenses and other secured debts. If the sale doesn't clear everything, a shortfall can remain. For example, a $550k sale against a $600k debt leaves a $50k gap before selling and legal costs.

Lenders Mortgage Insurance protects the lender. It doesn't cancel your responsibility for an unpaid debt. Ask a financial counsellor or solicitor about the proposed treatment of any shortfall before signing an agreement.

Once the immediate issue is under control, set repayments against your actual pay cycle and allow for irregular bills. Review the loan before a fixed rate expires, and keep a cash buffer that you can access when needed. Check the terms before relying on redraw, because access can be restricted.

If your income has changed, our low-income home loan guide explains how we approach the budget. If the problem is the loan's ongoing cost, compare the rate, fees and remaining term using our mortgage-fee guide.