Asking for a hardship variation - Mortgage stress
Step 1: Working out what to offer
Before you do anything, you need to work out what you want to offer as a repayment arrangement. Be realistic. The repayment you offer must be affordable. You must be able to make the new repayment each month.
Do not offer to make repayments you cannot afford.
To work out how much you can afford to put towards mortgage repayments, it is a good idea to make a budget. As a guide, the repayment you offer should not be more than 50 – 60% of your income. You need to make sure you have enough income for food and bills.
It may help to speak to a free financial counsellor to:
- work out what you can realistically afford to repay, and
- help you apply for a hardship variation or negotiate with your lender.
You can also get more information about creating a budget from the MoneySmart website.
What if I can't afford to make any repayments?
If you cannot afford to make any repayments, then you will need to ask the lender to let you postpone or suspend repayments for a period of time
Making no repayments can, however, have serious consequences:
- Your lender is less likely to consider further requests for hardship variations if you have not been making any repayments.
- Your debt will grow fast, as you will still be charged interest on the loan amount.
- You will get out of the habit of budgeting and making regular repayments.
Step 2: Plan to return to usual payments
You need to give the lender a plan on how you will return to making the usual repayments.
If your financial hardship is because of illness or unemployment, you may not know exactly when you will be able to return to making the usual repayments. Estimate how long you will need and then ask for more time, if required.
If there is no clear future plan for how or when you will be able to return to your normal repayments, you may need to consider selling your home.