If higher home-loan repayments are squeezing your household, contact your lender’s hardship team before you miss a payment. Prepare an honest budget, state the repayment you can maintain, and ask for a hardship variation or another affordable arrangement. Keep the mortgage and essential bills at the top of your priorities, and treat any default notice or court document as urgent.
This guide is for borrowers in Australia. Hardship rules, complaint channels and legal deadlines differ in other countries, so overseas borrowers should use their local lender and government guidance.
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Start with the two decisions that matter most
Contact the lender early
Moneysmart’s guidance is direct: “The earlier you get help, the more options you’ll have.” Call, email or use your lender’s online chat and ask for the financial-hardship team. Do not wait for several missed payments to accumulate. Explain that rising repayments are creating financial hardship, describe the cause (for example, a rate rise, reduced income or a large essential expense), and give a realistic amount you can pay now.
More than 280,000 hardship notices were recorded across Australia in the 2024/25 financial year, according to a Moneysmart page updated in 2026. That figure covers hardship notices across credit products, not home loans alone, but it shows that asking for assistance is a normal process rather than a failure.
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Do not promise more than your budget can support
A temporary arrangement that you cannot maintain simply moves the crisis forward. Work out the amount available after essential living costs and other priority debts, then propose that figure. If your circumstances change, tell the lender immediately instead of silently missing the revised payment.
Prepare a clear picture before you call
The lender may ask why you need help, what income is coming into the household, which major expenses must be paid and what repayment you can afford. Have the following information ready:
- Loan account number, current interest rate, repayment amount and frequency, and the next due date.
- Any arrears, returned payments or fees already showing on the account.
- Recent net income for each household earner, including dependable government payments or other regular income.
- Essential spending such as food, utilities, insurance, transport, medicines, childcare, council rates and body-corporate fees.
- Other loan, credit-card, buy-now-pay-later and tax obligations, with their payment dates.
- A short explanation of what caused the squeeze and whether you expect it to last weeks, months or longer.
Put the dates on one calendar so you can see whether the proposed payment fits between paydays and other direct debits. Moneysmart provides a free budget planner; a plain notebook or spreadsheet can do the same job. The important thing is that every figure is based on actual statements or a conservative estimate, not an optimistic month.
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- Use the lender’s official contact channel. Ask specifically for a hardship officer or hardship team. Keep the date, time, case number and the name of anyone you speak with.
- State the problem and your affordable payment. You can say: “I’m experiencing financial hardship because my home-loan repayments have become difficult to manage. I can afford [amount] each [fortnight/month] at present. What hardship assistance can you assess me for?” Replace the bracketed words with your own figures; this is a practical script, not a required form of words.
- Send supporting information promptly. If the lender asks for payslips, bank statements, a budget or other documents, provide them through the secure channel it specifies and retain copies.
- Ask when and how the decision will arrive. Moneysmart’s mortgage guidance says the lender must write with the outcome within 21 days of the request, or within 21 days after you provide further information if more information was requested. Keep the written decision and the terms of any arrangement.
The lender must consider the request and give reasons if it refuses. A lender may change loan terms, pause repayments temporarily or reduce them for a period, but no particular result is guaranteed. Continue paying what you can while the request is assessed unless the lender tells you otherwise in writing.
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Understand the arrangement before agreeing
Temporary reduction or deferral
A payment pause or reduced-payment period can create breathing room, but interest may continue to accrue and the balance can increase. Ask what the repayment becomes when the pause ends, whether the missed amount is added to the balance or spread over later instalments, and whether the loan term changes.
Payment plan for arrears
If you have fallen behind, the lender may spread the arrears over an agreed period alongside the normal repayment. Confirm the total amount and the final date of the plan. Ask what happens if one payment is late and how quickly you must report a further change in circumstances.
Longer-term loan variation
A variation can alter the interest rate, repayment schedule, term or another contract feature. A lower periodic payment may result from extending the term, but paying for longer generally increases total interest. Request a written comparison with your current balance, new repayment, end date and estimated total cost.
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- What will I pay during the assistance period?
- What will I pay immediately afterward?
- Will unpaid interest, fees or arrears be added to the principal?
- Does the arrangement change the loan term or any offset, redraw or extra-repayment feature?
- How and when can I request a review if my income or expenses change?
Protect the rest of the household budget
Moneysmart places mortgage payments, council rates or body-corporate fees, utilities and essential car repayments among higher-priority bills. List those obligations alongside food, medication and transport before deciding what discretionary spending can be paused. If you cannot pay an electricity, water, telecommunications or other essential bill on time, contact the provider before the due date and ask for an extension, instalment plan or hardship support.
Avoid using high-cost new credit to cover the mortgage unless you have calculated how that borrowing will be repaid. Moving a shortfall to a credit card or other expensive facility can turn a temporary problem into several overlapping repayments. Cancel or reduce non-essential direct debits only after checking whether doing so creates a contract fee or insurance gap.
Is refinancing a sensible option?
Refinancing can reduce a repayment, but it is not automatically a solution to hardship. Ask your current lender whether it can offer a better rate or suitable variation first; changing lenders can involve costs and a new eligibility assessment. A lower monthly figure can also reflect a longer term and a higher total interest bill.
Compare the complete offer rather than the headline rate:
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| Item to compare | Why it matters |
|---|---|
| Interest rate and type | A small rate difference affects every repayment; check whether it is fixed, variable or a temporary discount. |
| Application, discharge, switching and ongoing fees | One-off costs can outweigh a rate saving, especially if you may move again soon. |
| Fixed-rate break costs | Leaving a fixed loan early can trigger a break fee calculated by the lender. |
| Lender’s mortgage insurance | Increasing the loan relative to the property value may create a new insurance charge where applicable. |
| Features | Check offset, redraw, extra-repayment limits, repayment frequency and conditions attached to each feature. |
| Eligibility | The new lender will assess income, expenses, credit history, property value and loan-to-value ratio; approval is not guaranteed. |
| Remaining term and total repayment | Extending the term may lower each payment while increasing total interest. Calculate both the periodic payment and the total cost. |
Work out how many months of interest savings are needed to recover all switching costs. Comparison websites can be useful for collecting possibilities, but they are businesses that may use promoted links and may not show every loan. Check the lender’s own documents and ask for a formal quote before applying.
Fixed, variable or split: match the structure to your risk
| Loan structure | Payment certainty | Flexibility and risks |
|---|---|---|
| Fixed rate | Repayments are predictable during the fixed period. | Payments do not fall if rates drop; break fees may apply and extra repayments or offset access can be limited. |
| Variable rate | Repayments can rise or fall as the lender changes the rate. | Usually offers more scope for extra repayments, offset or redraw, but the household carries rate-change risk. |
| Split loan | Part of the balance is fixed and part variable. | Combines characteristics of both but adds administration and may leave only part of the balance flexible. |
Test any proposed payment against a range of rates. Moneysmart suggests checking affordability at rates including a 3-percentage-point increase. This is a stress test, not a forecast of where rates will go. Include the effect of the test rate in your budget before deciding that a refinance or new structure is affordable.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to do if the lender refuses or you receive a legal notice
If hardship assistance is refused
Ask for the decision and reasons in writing. Use the lender’s internal dispute-resolution process, following the complaint instructions on its website or in the decision letter. If the matter is not resolved, the Australian Financial Complaints Authority (AFCA) provides free, independent dispute resolution. Keep your application, documents, call notes and every response in date order.
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If a default notice arrives
Do not ignore it. Moneysmart says a mortgage default notice gives 30 days to pay the overdue amount plus the regular repayment. Contact the lender’s hardship team and obtain free legal advice immediately so you understand the notice and any available response.
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If you receive a Statement of Claim or summons
Get legal advice as soon as the document arrives. Court response deadlines differ between Australian states and territories, and missing one can limit your options. A financial counsellor can help you organise information, but counselling is not a substitute for meeting a court deadline.
Free support and credit-report information
Australians can contact the National Debt Helpline on 1800 007 007 for free financial counselling. A counsellor can help prepare a budget, communicate with creditors and identify government or community assistance. Confirm the service’s current hours and contact details when you call.
Moneysmart’s hardship guidance says entering a hardship arrangement does not affect a credit score, while the arrangement is recorded on a credit report and deleted after 12 months. Credit-reporting rules and lender reporting practices can change, so ask the lender or a counsellor to explain how the specific arrangement will be recorded and check your current credit report for accuracy.
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Quick Recap
A practical order of operations
- List the loan details, income, essential costs, other debts and due dates.
- Calculate the repayment you can maintain without missing essentials.
- Contact the lender’s hardship team and make the request before arrears grow.
- Read the written terms, future repayment and total-cost effects of any offer.
- Ask utility and other essential providers for hardship support where needed.
- Compare refinancing only after checking fees, features, eligibility, term and total interest.
- Escalate a refusal through internal dispute resolution, then AFCA if necessary.
- Obtain urgent legal advice for a default notice, Statement of Claim or summons.
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