What happens if you can’t pay your mortgage in Australia?

can't pay my mortgage

“What happens if I can’t make my mortgage payments? Will the bank seize my property?” is a question many are asking in these challenging times. It’s not surprising given the current economic climate in Australia, where the inflation rate is at 7%, and prices are almost 39% higher compared to previous years.

So today, we will discuss the potential consequences of being unable to pay your mortgage and provide some guidance on the steps you can take to manage this challenge.

Can I skip just one month of mortgage repayment?

Yes, but there’s a catch: you must let your lender know. Lenders are often willing to work with borrowers who are proactive about their circumstances. They may be able to offer you a temporary hardship variation, which could include deferring your mortgage payment for a short period.

If you miss a payment without notifying your lender, it could be marked as a default on your credit report. This can negatively impact your credit score, making it harder for you to borrow money in the future.

What happens if you stop making mortgage payments?

Several things can happen, each more serious than the last. Here’s a breakdown of what you might expect:

Late fees

If you miss a mortgage payment, your lender will likely charge you a late fee. The amount of this fee can vary, but it’s typically a percentage of your mortgage payment. This fee will be added to the total amount you owe. This typically applies if you’re within 90 days from your payment due date.


If you continue to miss payments, your loan could go into default. This typically happens after about 90 days of missed payments. Once your loan is in default, this will reflect in your credit report and stay there for five years.

Damage to credit score

Once your credit report shows that your mortgage is in default, your credit score can significantly get lower. This affects your ability to borrow money in the future–at least until the “default” mark is gone.


If your loan defaults, your lender will notify you and give you 30 days to pay. If they don’t hear from you, the lender may start the foreclosure process. This is a legal process where the lender takes possession of your property because you failed to make payments. The foreclosure process can take several months to a year to complete.


If your property is foreclosed, you will eventually be evicted. This means you’ll have to leave your home. The timeline for eviction can vary, but typically you’ll receive a notice giving you a certain amount of time to vacate the property.

How soon should I contact my lender if I can’t pay?

As soon as you realise you’re facing financial difficulties and your circumstances are unlikely to change in the immediate future. This could be due to various reasons such as job loss, critical illness, or any other significant life event that impacts your income.

How can I avoid foreclosure on my home?

Contact your lender

As mentioned earlier, your first step should be to contact your lender as soon as you realise you’re having financial difficulties. They can offer solutions such as modifying your loan terms.

If your financial difficulties are due to circumstances beyond your control, such as job loss or illness, you may be eligible to apply for financial hardship assistance. This could involve changing the terms of your loan, such as extending the length of the loan or temporarily pausing or reducing your repayments. Lenders in Australia are required to consider requests for financial hardship assistance.

Get financial counselling

Financial counsellors can provide free, independent and confidential advice to help you understand your options and navigate your financial situation. They can help you create a budget, suggest ways to manage your debt, and provide information about government assistance programs.

Speak with a legal advisor

If you’re facing the threat of foreclosure, consulting with a legal advisor may be beneficial. They can help you understand the legal process and your rights and may be able to negotiate with your lender on your behalf.

Free legal advice is available from community legal centres and each state’s and territory’s Legal Aid agencies.


You might consider refinancing your mortgage if you have equity in your home and a good credit score. This involves taking out a new loan to pay off your existing mortgage. The new loan may have better terms, such as a lower interest rate or longer repayment period, which could make your repayments more manageable.

Consider selling the property and downsizing

If other options aren’t viable or enough to alleviate your financial strain, consider selling your property and moving to a more affordable home. This can be a difficult decision, but it could help you avoid foreclosure and reduce your financial stress.

Call for a Free Financial Assessment

If you need help with your mortgage payments and need help with what steps to take next, talk to us. We offer a range of debt solutions tailored to your unique financial situation.


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