Financial hardship and mortgage stress

Mortgage stress is when a household’s income doesn’t cover its outgoings, including mortgage repayments. Getting behind with mortgage repayments can happen to anyone.

If you are having problems paying your mortgage you need to act quickly and not put your head in the sand. In many cases, there are steps you can take which might stop a small problem becoming a big problem. This might give you the best chance of keeping your home, or at least selling it on your terms.

Quick Answers Video: How Legal Aid WA can help with mortgage stress

Legal Aid WA has a Mortgage Hardship Service that may be able to help you. You can access the Mortgage Hardship Service by calling Legal Aid WA’s Infoline on 1300 650 579.

The Legal Aid WA Mortgage stress self-help guide may help if you are having trouble paying your mortgage. It has information about your options at every stage - whether you are just beginning to have problems meeting repayments, have received a default notice, have received a Writ, or the sheriff is at your door.

This webpage has information on what you can do if you can’t repay your mortgage, including when you can apply for a hardship variation and what to ask for and what you can do if your application is unsuccessful.

What should I do if I can’t repay my mortgage?

If you make your mortgage repayments by direct debit, but there is not enough money in your account, the direct debit will be rejected (sometimes called 'dishonoured'). If this happens you will not make any repayment at all.

You are likely to be charged fees on your account and your mortgage.

If you cannot make the full loan repayment, you should:

  • contact your lender and negotiate a variation to arrange a direct debit amount you are sure you can afford, or
  • cancel the direct debit and make repayments using another method (for example, by BPay or direct credit). Do not cancel the direct debit without making another payment arrangement with the lender.

I’ve missed a repayment – what can the lender do?

The lender must take a number of steps before it can take possession of your home. The sooner you act the more likely it is that you can negotiate a repayment arrangement that fits with your circumstances.

Does the lender have to go to court to get possession of my home?

No, they do not have to go to court, but they usually do.

One of the reasons they do is so they can get a sheriff to ask you to leave and change the locks on your home by order of the court.

The most common exception when the lender doesn’t go to court is when the property is vacant or undeveloped land. If these situations apply to you, your matter is urgent, and you need to act as soon as you have received a Form 12 default notice.

When can I apply for a hardship variation?

In many cases, a good starting point if you are struggling to meet repayments is to apply for a hardship variation. The application for financial hardship is called a ‘hardship notice’. You have a right to do this.

Under the National Credit Code, if you have 'reasonable cause' for being unable to meet your repayments, you can ask the lender to change the loan contract to change your repayments. 'Reasonable cause' means 'a good reason', for example, due to illness or unemployment.

You could also apply if you are unable to pay your loan longer term and want to change your loan repayments while you sell your home.

The lender may not agree to the change you want if you can’t show you will be able to repay the loan if the change is made. 

What can I ask for in a hardship variation?

You can ask for any change that will make your loan repayments more affordable or, if you have decided you cannot keep up the mortgage, give you time to sell your house, such as:

  • reduce repayments to an amount you can afford
  • extend your loan period, so you make smaller repayments over a longer period
  • postpone your repayments for an agreed period
  • extend your loan period and postpone your repayments for an agreed period
  • reduce or freeze the interest rate for a period of time, or
  • postpone payments while you sell your house or another asset (like a car).

What can I do if my hardship application is unsuccessful?

If your lender refuses your hardship variation, they must give reasons why. If you are not happy with their response, you can ask to speak to their internal dispute resolution section.

If you are not happy with their internal decision, or the lender fails to respond within the set time, you should apply to the Australian Financial Complaints Authority (AFCA) for a review of that decision.

AFCA is the free and independent external dispute resolution (EDR) scheme for financial service providers, borrowers and consumers. Contact AFCA on  1800 931 678 (free call).


Reviewed: 1 November 2023

Having trouble paying your home loan?

The Mortgage Stress self-help guide can take you through the different options if you are behind in mortgage repayments.


The information displayed on this page is provided for information purposes only and does not constitute legal advice. If you have a legal problem, you should see a lawyer. Legal Aid Western Australia aims to provide information that is accurate, however does not accept responsibility for any errors or omissions in the information provided on this page or incorporated into it by reference.