If you’re struggling to keep on top of your home loan repayments, you’re not alone.
Your bank is ready to listen and consider possible solutions that are right for you.
It’s important to be open and realistic when talking about your financial position. The sooner you get in touch, the sooner you can start to find help.
Help to improve your situation
Taking a closer look at your budget could help you to get your finances back on track.
You’ll need to consider your income, expenses, the debt you’re managing and any savings and investments you have. Are there any changes you could make to reduce your expenses and consolidate your debts?
Doing this will give you a better understanding of how much you can save, or where to make cuts in your spending to improve your financial health.
For assistance with budgeting, you could use the online Moneysmart budget planner.
This is a good step to take, as your bank may ask you about your income, expenses, and any changes you intend to make when discussing options to assist you.
What are some of your options?
Your bank will have a dedicated customer support team ready to assist you during tough times. They can talk to you about options and managing your budget.
They may allow you to change the terms of your loan, or temporarily defer or reduce your repayments. If they don’t allow you to change the terms of your loan, they need to tell you why, in writing, and give you details about where you can complain.
If you can, keep making repayments, even if they’re smaller to help keep the cost of your mortgage down.
Are there ways to reduce my repayments?
Your bank may have a range of options to help you. However, these will depend upon your personal circumstances and your bank. Some of the options that may be available include:
- Using any eligible funds that you may have in your loan redraw facility
- Talking to your bank about options for restructuring your loan
- Reducing repayments to your minimum monthly repayment amount
- Using any savings to offset your amount
- Working with your bank to consolidate all your loans and finances
- If you’re eligible, you could consider switching to an interest only loan
- Sell and downsize to a home you can afford
Your bank may also ask you for relevant information to better understand how they may help with potential options. This may include:
- Proof of income – such as recent pay slips, profit/loss statement for self-employed, rental income, Centrelink income, notice of termination and termination payments.
- Essential expenses – such as rent/mortgage payments, summary of outstanding bills and credit card statements / loan repayments from other financial providers, and essential living expenses.
If you’ve contacted your bank to let them know you are worried about repayments, your bank can ask for relevant information within 21 days of you contacting them. When your bank asks for this information, you must provide it within 21 days.
Restructuring your loan
If your situation has changed and you’re struggling financially, then your bank may agree to restructure the arrangements of your loan.
If you and your bank agree on a new arrangement for your loan, your bank will tell you about the changed arrangements in writing. These will include the new repayments you will need to make, what will happen at the end of the new arrangement and whether accepting the proposed new arrangement will have any adverse consequences in relation to banking services or your credit history.
Sometimes, even if you and your bank agree on a new arrangement for your loan, you may find your circumstances don’t improve as you’d hoped. If this happens don’t forget to keep in touch with your bank.
It’s important to understand that making changes to your loan may increase costs due to additional interest charges, and if you’re unable to make future repayments when your financial assistance period ends, you may have to sell your property. Your property may have reduced in value compared to selling earlier, which may result in a larger financial loss for you.
What does this mean if you have a guarantor for your loan?
If your loan is subject to a guarantee, your bank will notify your guarantor about your deteriorating financial position and, within 14 days provide:
- A written notice if you have advised your bank that you are experiencing financial difficulty which has resulted in a change to the loan
- A copy of any formal demand or default notice that the bank gives you
- A written notice if you are in continuing default for more than two months after the issuance of the demand or default notice.
Will this affect my credit rating?
Your credit report shows whether you have made your loan or credit card repayments on time for each account over the past two years. In normal circumstances, missing or making a late payment on one of your accounts will reduce your credit score. A lower credit score may affect your ability to receive finance in the future.
If you are experiencing financial difficulty and are not able to make your loan or credit card repayments on time, it is important to get in touch with your bank. Depending on your circumstances, you and your bank may agree to a financial hardship arrangement.
One benefit to entering a financial hardship arrangement is that your credit report will show that you have made your repayments on time for the period of the arrangement. This is provided you meet any terms agreed with the bank, such as making lower repayments for a period of time.
Your credit report will also include information that indicates you are in a financial hardship arrangement. This information will stay on your credit report for one year and then disappear. Credit reporting bodies do not use financial hardship information to calculate your credit score, so entering an arrangement will not result in a lower score.
Avoid companies offering to repair your credit rating. You are entitled to one free copy of your
credit report every three months through the Australian credit reporting agencies, which are Equifax, Experian and illion.
Managing other loans and credit cards
If you’re worried about making your mortgage repayments, then you may also be struggling with one or more credit card payments and other loans too. If so, it’s important that you mention these to your bank as well.
A financial counsellor can assist you in managing multiple debts, or Way Forward Debt Solutions may also be able to help.
Steer away from companies offering to ‘save’ your home or negotiate reduced repayments. These companies charge high upfront and ongoing fees and could leave you worse off. Speak to a free, independent, and confidential financial counsellor instead.
Take care of yourself and seek help
Please reach out if you feel you are in over your head. You could contact the National Debt Helpline on 1800 007 007 and speak with a financial counsellor. Financial counsellors are qualified professionals who provide free, independent, and confidential information and advice to people in financial difficulty.
Charities and community organisations can provide urgent help with food, housing and bills as well as emotional support.
If you have debts with multiple banks, Way Forward Debt Solutions may be able to help you manage your debt.
Moneysmart is another useful resource to help you.
What if you’re not happy with your bank’s response?
If you’re not happy with your bank’s response, you can make a complaint. You can find more information here.
In many cases, the complaint will be resolved internally between you and your bank with no further action required.
However, if your bank still doesn’t resolve the complaint to your satisfaction, you can take your complaint to the Australian Financial Complaints Authority (AFCA).
AFCA is an independent complaints scheme that is free for consumers. It provides an accessible way of resolving disputes, without having to go to court. The decision of the AFCA is binding on the bank.
You should only go to the AFCA after you have tried to resolve things with your bank, as AFCA will not deal with your complaint unless you have first given the bank the chance to help you.
If you want some support in making a complaint, a financial counsellor may be able to assist you. Call the National Debt Helpline to speak with a financial counsellor on 1800 007 007.