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Mortgage stress handbook

5. Catching up on repayments: my options

Below is a list of options to consider. The options are designed to help you catch up on your mortgage payments. As none of the options below are certain to work you MUST still make a repayment arrangement based on your income (see Chapter 6). It is strongly recommended that you do not make promises to pay based on one of the options below. If you do pursue any of the options below, and you are successful THEN you can pay this money to the lender.

Remember Remember

There is no point selling your possessions, accessing your superannuation or getting further loans if you will need to sell your home anyway.

  • Do a budget and cut down on unnecessary expenses
  • Rent out your home and live (hopefully rent free or cheaper) somewhere else until you can manage your repayments
  • Take in a boarder
  • Get help from friends or relatives (but remember they may want to be repaid)
  • Get Mortgage assistance (if available). See Chapter 11.
  • Access your superannuation (if available). See Chapter 10.
  • Sell some of your possessions
  • Consider refinancing your home loan (only if you can get a cheaper rate and you can afford the new repayments. Beware of predatory lenders - see below)
  • Consider applying for a repayment arrangement on other debts while you catch up on your mortgage. Do not simply ignore other debts as you can eventually lose your house because of unsecured debts like credit cards – it just takes a bit longer.
  • Consider changing your loan to an interest-only loan for a fixed period (this will reduce your repayments during this period)

Beware of predatory lenders

If you are considering refinancing your home loan be careful to avoid high cost exploitative lenders.

Things to look out for:

  • The loan is described as a business/investment loan and you are required to sign a declaration to state that the credit law does not apply. 
  • The mortgage broker charges a large fee. 
  • The loan is for a short term. 
  • The loan is for interest only for a term but you cannot afford to repay principle and interest repayments. 
  • The interest rate is quoted “per month” instead of “per annum”, or is otherwise particularly high. 
  • You do not have to make repayments for a set period, or the whole loan, but the whole loan amount is payable within a short time (less than 5 years).
Do not refinance if the repayments on the new loan will be higher than the repayments you are currently required to pay!