Defaulting on your home loan is something that should be avoided at all mortgage-default costs, as it can leave devastating and ongoing effects. Not only can it tarnish your credit history and make it very difficult to secure a loan in the future, but may also result in your home being repossessed and sold by the lender.

Previously, banks and other lenders took a number of months before commencing proceedings for a repossession of a house. But according to the Financial Rights Legal Centre, the process can now happen a lot faster. Lenders follow a stringent timetable to begin court proceedings once a loan default has occured, and this is very hard to stop once the ball is in motion!

When you take out a home loan, the lender takes your home as security and if you do not meet the regular repayments (as set out in the contract) your house can be taken from you and sold. This “repossession” can only occur if:

  • There is a mortgage over your home
  • You have “defaulted” on the loan agreement (failed to make payments)
  • You have been sent a Default Notice

If you have defaulted on your loan and received a notice, you have 30 days to make the outstanding payments or the lender can take possession of your home and sell it. You must also continue to make any ongoing repayments that occur in that 30 day period as well.


This all sounds really scary! So what can i do?

If you’re having trouble making home loan repayments but have not yet received a Default Notice, the best thing to do is seek legal advice and look to organise a repayment arrangement. Lenders negotiate repayment arrangements all the time, so call them and be upfront and explain your situation.

If you’ve received a default notice you will need to take action immediately. As mentioned, you have 30 days to pay the outstanding arrears, after which time the whole loan becomes payable.  Negotiate a repayment arrangement with your lender, but make sure you don’t agree to terms that are unrealistic. Otherwise you’ll find yourself in the same boat down the track.

A finance broker may also be able to help you work out specifically where the issue lies in your repayment strategy. They can also look to refinance to a lower rate or lower fee loan to help you save money and get your budget back on track.

If you DO find yourself struggling with mortgage repayments, the most important thing is to speak with someone! For more information, call our Mortgage and Finance Specialist Alicia McDermott on 0431 304 507.