What To Do If You Can’t Make Your Mortgage Payment

It’s no secret that times are a bit tough for Australians at the moment. But it might help to know that if you’re struggling to make your mortgage payments, you’re not alone. Almost 31% of all mortgage holders (that’s nearly one in three!) are at risk of mortgage stress in 2024.

So if you’re one of those many thousands of Australians asking what to do if you can’t make your mortgage payment, don’t go it alone. There are steps you can take to help you manage mortgage repayments when times are tough and our team is here to help you manage the entire process.

What to do if you can’t make your mortgage payment

Step 1: Prepare to take action right away

The first and most important step if you find you can’t make your mortgage payments is to take action right away. Don’t ignore the problem. Ignoring missed mortgage payments won’t make them go away. In fact, it will only make the situation worse, and make it harder for you to get assistance overall. Open communication is THE KEY to bettering this situation.

If you reach out quickly and communicate openly, lenders will quite often work with you if you’re in the position of missing mortgage payments. After all, it’s in their best interest to continue to receive payments from you in some form. However, they’re willingness to work with you will depend on how they view you as a borrower. And if you don’t address the problem straight away this can work against you.

In addition, missed payments can lead to fees, additional interest and a bad mark on your credit score. Continued delinquency could eventually lead to foreclosure as well.

Step 2: Talk to your mortgage broker

Your mortgage broker is uniquely situated to be your best ally in this situation. They have seen every kind of financial difficulty and are well-versed in the best way to handle each one. They’ll help you understand all your options and which might work best for you.

Mortgage brokers also have an established relationship with lenders and they know exactly how to navigate the process. They can help you draft a hardship letter and gather the right documents to provide to your lender.

Best, your mortgage broker can help allay your fears. Knowing that you have the right support goes a long way to boosting your confidence that you’re taking all the right steps. Again, open communication is the key to getting the best help from your mortgage broker.

Step 3: Reach out to your lender

Once you’ve figured out all your options with your mortgage broker, and the best way to communicate, it’s time to approach your lender. Your lender will certainly understand that financial hardships happen, and they will have processes in place to help assist borrowers who are in distress.

Contact your lender (the sooner the better) and ask to speak to the hardship department. The hardship department staff will be able to explain the assistance they could offer. Depending on the circumstances you might be able to request:

• Forbearance gives you a temporary suspension or reduction of your mortgage payments in the short term. Generally a lender will only give forbearance for a few months, though some may provide it for longer. And it pays to consider this carefully as it could impact your ability to get a loan in the future.
• Loan modification. With a loan modification you are actually changing the terms of your loan with the goal of making it possible for you to make your repayments. This could be done by extending the loan term or changing the type of loan.
• Repayment plan. If you’ve already missed a few payments, your lender might agree to a repayment plan so you can catch up. Generally this involves spreading the overdue amounts over your regular payments. So it might not be the right solution if you expect your difficulties in making payments to be ongoing.
• Refinancing is a great option. It allows you to take on a new loan to pay off the existing mortgage. During this process you can very often negotiate a lower interest rate (or an introductory interest rate) or a longer loan term, both of which can reduce your monthly payments.

Refinancing is an excellent choice, but it is best undertaken before you are in arrears. This will give you the best chance to get competitive interest rates and loan terms.

If you’re interested in refinancing, speak to your mortgage broker (or our team!) who can greatly assist with this process!

Step 4: Prepare your documents

Now that you know the assistance that you want to seek, it’s time to prepare your documents. You’ll need to gather evidence of your financial hardship. This might include tax returns, medical bills, pay stubs and the like. You may also need to prepare a detailed budget showing your income, expenses and assets.

You will also likely need to draft a hardship letter. This is simply a letter that explains why you’re unable to make your mortgage payments.  The key here again is communication. Be open and honest about your situation and provide as much detail as possible. Our team can help you draft the best version of this letter as well.

Your hardship letter and documents will give your lender the information they need to determine whether they can offer you assistance.

Step 5: Consider government assistance programs

There are also many different government assistance programs that might be able to help you. For example, the Queensland State Government offers a Mortgage Relief Loan. This is a short-term loan that helps people who are struggling to make loan payments due to unemployment, illness, an accident or another crisis. This is a great option as it’s interest fee, and there are no application fees or ongoing charges.

The ACT has a similar government-funded mortgage relief scheme.

You’re not alone!

When it comes to what to do when you can’t make your mortgage payments, the best first step is to act quickly. Give our team a call right away. We’re on hand to help you quickly determine the best steps to take, and get you in front of the right people. We can also help you negotiate with your lender and advocate on your behalf.

Don’t go it alone. Get in touch today. We’re ready to help!

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