Default notices - Mortgage stress
A default notice is a notice informing you of your overdue payment and requesting payment of that amount.
If you receive a default notice you should:
Pay the amount owed and your usual repayment within 30 days. Once you have caught up with repayments, you are no longer in default and the lender cannot start legal action against you.
Apply for a hardship variation if you cannot afford to pay the amount in default. You should try to get a repayment arrangement in place and confirm it in writing before the 30 days ends. This will give you time to consider other options such as refinancing or selling.
Can I ignore the default notice?
You should not ignore the default notice. If you do not pay, the lender can take possession of your home after completing certain steps.
What if the lender is asking for more than the arrears, do I have to pay?
If there is an acceleration clause in the mortgage contract, the lender may accelerate the debt so that the whole of the loan (rather than just the arrears) becomes immediately payable when you are in default. Most mortgage contracts will have an acceleration clause.
Subject to some exceptions, an acceleration clause can generally only operate if:
- you are in default
- the lender has given you (and any guarantor) a default notice, and
- the default is not rectified within the period specified in the default notice.
Will being behind in my mortgage repayments affect my ability to get credit in the future?
Yes, being behind on your mortgage repayments may affect your ability to get credit in the future.
Subject to certain notice and time requirements, lenders can list a default of $150 or more against your credit report. If the matter goes to court, a judgment will also be listed and remain on your file for five years.