Record low rates don’t seem to have helped mortgage holders from feeling the pinch, as the number of Australians behind on their mortgage payments has hit its highest level in three years. A new report from credit ratings agency Moody’s shows the proportion of borrowers more than 30 days behind on their mortgage payments hit 1.5%.

When you get behind on your mortgage repayments it is time to get serious. Give yourself the best chance of keeping your home or selling it on your own terms, by contacting your lender or seeking legal advice.

The lender must take a number of steps before it can take formal legal action including repossession of your home. The sooner you act in the process, the more likely it is that you can make a repayment arrangement with the lender and hopefully save your home.


Here are the steps the lender could take:

Steps the lender could take What you can do

Step 1- Send letter
Send you a letter or contact you when you miss a repayment.

See guidance onmissed a mortgage repayment.

Step 2 - Default Notice
Send you a default notice. This default notice will give you at least 30 days to catch up on your missed repayments and any payment that falls due within the 30-day notice period.

During this 30-day notice period, you can:

  • Pay the amount you oweand any repayment that falls due during the 30-day notice period.
  • Ask your lender to temporarily reduce or delay your repayments, and have this confirmed in writing. This is called a hardship variation. If you are not happy with your lender's response and if you don't have time to complain to their internal dispute resolution department, you should lodge a dispute with theFinancial Ombudsman Service(FOS) - 1800 367 287 orCredit and Investments Ombudsman(CIO) - 1800 138 422.
  • Sell your houseif your financial situation is unlikely to improve. You will need to speak to your lender about this decision and they may ask for copies of proof that you are selling your property, like the contract of sale and any advertisements.

If you don't take any of these steps before the 30 days expires, your whole loan becomes due and payable at the end of the 30 days, and your lender can start legal action to take possession of your house to sell it to repay your home loan.

Note: If your property is rented, vacant or undeveloped land, the lender can take possession without going to court. So, if you receive a default notice you must act.

Step 3 - Statement of Claim
When your default notice period expires, your lender may serve you with a Statement of Claim or Summons for the debt or for the possession of your house. This will give you a limited fixed number of days (depending on your state or territory) from the date the court document is served on you, to file a defence.

Get legal advice urgently.Free legal adviceis available in each state and territory.

If you haven't already done so, you can lodge a dispute with theFinancial Ombudsman Service(FOS) - 1800 367 287 orCredit and Investments Ombudsman(CIO) - 1800 138 422.
If you do nothing, your lender can obtain a court order to take possession of your house.

Step 4 Apply for writ
Apply for a writ (a court order) to take possession of your home.

Get legal advice urgently.Free legal adviceis available in each state and territory.

Step 5 - Sheriff letter
Send you a letter telling you to move out and when a Sheriff will come to change your locks. This is also known as a Notice to Vacate.

Get legal advice urgently.Free legal adviceis available in each state and territory.

Step 6 - Eviction
Send a Sheriff to your home to evict you and change the locks.


Get legal advice urgently.Free legal adviceis available in each state and territory.

Please read  the Mortgage Stress Handbook for more details on the steps lenders can take and what you can do to stop the process.

Source asic and moneysmart.gov.au