If you have missed a home loan repayment, or you can see one coming, you are not alone, and you have more options than it may feel like right now. This guide explains how mortgage arrears in NSW work, what your lender has to do, and the steps that give you the best chance of staying in control.
This article is general information only and is not financial or legal advice. If you have received a default notice or court documents, get free legal advice straight away.
What does mortgage arrears mean?
Your home loan is in arrears when a scheduled repayment has not been paid in full by its due date. Arrears can build quickly: each missed repayment adds to the overdue amount, and many lenders charge default interest or fees. The earlier you act, the more options you usually have.
Mortgage arrears in NSW: 7 steps to take now
1. Contact your lender’s hardship team early
Do not wait for your lender to chase you. Call or write to your lender and ask for their hardship team. Explain why you are struggling (for example job loss, illness, a relationship breakdown or higher living costs), how long you expect the problem to last, and what you can realistically afford to repay.
2. Ask for a hardship variation
You can ask your lender to change your loan terms because of financial hardship. Depending on your situation, a lender may agree to temporarily reduce or pause repayments, extend the loan term or change how repayments are structured for a period. According to Moneysmart, your lender must tell you the outcome in writing within 21 days, or within 21 days of receiving any extra information they ask you for.
3. Work out a realistic budget
Before agreeing to a new arrangement, make sure you can keep it. List your essential costs, other debts and income, and agree only to an amount you can sustain each week, fortnight or month. If your circumstances change again, contact your lender early rather than missing the new payment.
4. Talk to a free financial counsellor
The National Debt Helpline (1800 007 007) connects you with free, independent financial counsellors. They can help you prioritise debts, prepare a budget and negotiate with your lender on your behalf.
5. Understand the default notice
If repayments stay overdue, your lender can send a default notice. Moneysmart explains that the notice gives you 30 days to pay the missed amounts plus your regular repayment, and that you can still apply for a hardship variation at this stage. If the arrears are not fixed, the lender may start legal action, which can lead to a Statement of Claim and, eventually, possession of the property. Legal Aid NSW has a detailed mortgage stress handbook and offers free legal help.
6. If your request is refused, make a complaint
If your lender refuses a hardship request, it must give you a reason. You can complain through the lender’s internal dispute resolution process and, if that does not resolve it, take the matter to the Australian Financial Complaints Authority (AFCA), a free and independent service.
7. Look at your longer-term options
Once things are stable, review whether your current loan still suits you. Options may include:
- Refinancing to a lower rate or longer term to reduce repayments, if your circumstances and credit history allow it.
- Debt consolidation, rolling higher-interest debts into your home loan. This can lower monthly repayments but may cost more over the life of the loan.
- Selling on your own terms. If your situation is unlikely to improve, Moneysmart notes that selling yourself may get a better price than a sale arranged by the lender.
Can I refinance if I am already in arrears?
It is harder, but not always impossible. Most mainstream lenders want to see a clean recent repayment history, so arrears can limit your choices or mean a higher rate with a specialist lender. Refinancing also has costs, such as discharge and establishment fees, so it needs to make sense overall. A broker can check which lenders may consider your situation before you apply, because several declined applications can affect your credit file.
Mortgage arrears NSW: where to get free help
- National Debt Helpline: 1800 007 007, free financial counselling.
- Legal Aid NSW: free legal help for homeowners in mortgage stress.
- AFCA: free, independent dispute resolution with your lender.
- Moneysmart: practical guides and a free budget planner.
- Beyond Blue: 1300 22 46 36, 24 hours a day, if the stress is affecting your wellbeing.
How SB Finance can help Hills District homeowners
If you are worried about your repayments, start with your lender’s hardship team and, if you need it, a financial counsellor. Once you are back on track, our Hills District brokers can review your home loan, compare refinancing options across 40+ lenders and explain any costs upfront. For home loans, there is no cost to you for our brokering service, as we are paid by the lender when your loan settles. Learn more about refinancing your home loan or book a free consultation.
Mortgage arrears: frequently asked questions
Will a missed repayment affect my credit file?
It can. Lenders can record late repayments in your credit report, so contact your lender as early as possible and ask how a hardship arrangement will be reported.
Can my lender take my home straight away?
No. Lenders must follow a legal process, including issuing a default notice that gives you at least 30 days to fix the arrears, before taking court action. Get legal advice early if you reach this point.
Does asking for a hardship variation cost anything?
Asking is free. Some changes, such as extending your loan term, can mean you pay more interest overall, so ask your lender to explain the total cost before you agree.
