In short: If you reasonably expect to be unable to meet your home loan repayments, you have a legal right under section 72 of the National Credit Code to give your lender a hardship notice and ask for a variation. The lender must respond within 21 days, cannot start enforcement while it considers the notice, and if it refuses must give reasons and tell you about AFCA. Acting early usually avoids a default listing.
Hardship rights exist because losing a job, falling ill or separating shouldn't automatically mean losing a home. The law gives you a structured process, and lenders are used to it. This page explains what to ask for, how the timeline works, and what it does to your credit file.
What the law says
The National Credit Code is Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth). Section 72 provides that a borrower who considers they are or will be unable to meet their obligations under a credit contract may give the lender notice, orally or in writing, of their inability. That is a hardship notice.
Once a hardship notice is given:
- The lender may, within 21 days, ask you for information relevant to deciding whether you are in hardship and how to help.
- The lender must give you a written response within 21 days of the notice, or within 21 days of receiving the information it asked for. The response must say whether it agrees to a change, and if not, the reasons and the name and contact details of the external dispute resolution scheme.
- If the lender agrees to a change, it must give you written notice of the change within 30 days.
- The lender must not begin enforcement proceedings while a hardship notice is being considered, and for a short period after refusing it, unless you have given a previous hardship notice recently or the lender reasonably believes you are acting in bad faith.
Section 88 of the Code separately requires a default notice giving at least 30 days to remedy before enforcement, and section 94 lets you ask for enforcement to be postponed.
The Banking Code of Practice adds commitments from subscribing banks to work with customers in financial difficulty, to train staff, and to consider your circumstances genuinely. AFCA can freeze enforcement while a hardship complaint is open. Free, confidential financial counselling is available through the National Debt Helpline on 1800 007 007, and ASIC's Moneysmart (moneysmart.gov.au) explains the process in plain language.
What you can ask for
A hardship variation can take several forms, and you can propose one that suits your situation:
| Variation | How it helps | Watch out for |
|---|---|---|
| Payment pause (deferral) | No repayments for a set period, often 3 to 6 months | Interest still accrues; loan balance grows |
| Reduced repayments | Pay what you can afford for a period | Arrears capitalised at the end |
| Interest-only period | Lowers the repayment while income is down | Higher repayments later to catch up |
| Term extension | Permanently lowers the repayment | More total interest over the loan |
| Capitalising arrears | Adds missed payments to the balance | Slightly higher ongoing repayment |
| Switch to a lower rate or product | Reduces cost without a pause | May require a full assessment |
| Time to sell | Enforcement held while you sell voluntarily | Must be actively marketed |
How to use your hardship rights, step by step
- Contact the lender before you miss a payment if you can. Every lender has a hardship team. Ask for it by name.
- Give a hardship notice. Say clearly that you are giving notice of financial hardship under the National Credit Code. Follow up in writing so the date is recorded.
- Explain the cause and the outlook. Illness, job loss, reduced hours, separation, business downturn. Say whether it is temporary and when you expect to recover.
- Propose a variation. A specific request, such as a three-month pause followed by a return to full repayments, is easier to approve than an open-ended plea.
- Provide information promptly. Payslips, medical certificates, separation documents, a budget.
- Get the response in writing. Check the variation terms, particularly what happens to arrears at the end.
- If refused, complain. First to the lender's internal dispute resolution, then to AFCA. Enforcement is generally paused while AFCA considers the complaint.
- Review before the arrangement ends. If you haven't recovered, seek a second variation, a refinance or a sale on your terms.
Timeline
| Day | Event |
|---|---|
| 0 | You give a hardship notice |
| Up to 21 | Lender may request information |
| Within 21 of notice or of information | Lender must respond in writing |
| Within 30 of agreeing | Written notice of the variation |
| Throughout | No enforcement while notice under consideration |
| If refused | Reasons given; AFCA contact provided; short further period without enforcement |
Worked example
A couple in Craigieburn have a $520,000 loan with repayments of about $3,120 a month at an illustrative 6.00% p.a. over 30 years. One partner's hours are cut and household income falls by $1,500 a month for what they expect to be about four months.
They phone the lender's hardship team before the next repayment, confirm the notice by email, and propose four months of half repayments ($1,560) followed by full repayments with the shortfall capitalised. The lender requests a budget and the employer's letter, then approves the arrangement within the 21 days.
At the end of four months, about $6,240 of shortfall plus accrued interest is added to the balance. Their repayment rises by a few dollars a month for the remaining term. Because the arrangement was met, their credit reports show the payments as made under a hardship arrangement rather than as missed, and no default is listed.
What it means for your home loan and credit file
- Financial hardship information on credit reports. Since mid-2022, credit reporting can show that a hardship arrangement was in place for a particular month. The information is retained for 12 months and lenders assessing a new application can see it, although it is not used in the same way as a default listing. Repayments made under the arrangement are reported as met.
- A default listing is worse. A default stays on your file for 5 years and can block a refinance. Hardship, used early, is the way to avoid it. See credit scores and home loans.
- Refinancing during hardship is hard, refinancing after it is possible. Once you have returned to full repayments for a period, a refinance to a cheaper loan or a debt consolidation to reduce total outgoings may be the permanent fix.
- Interest-only or term extension changes the total cost. Use our mortgage repayment calculator to model the arrangement before you accept it.
- Guarantors should be told. A lender in hardship discussions may notify a guarantor of arrears.
- Cut costs elsewhere first. Our guide to mortgage stress and what to do covers the practical steps that make a hardship arrangement work.
GNT Finance helps clients through hardship conversations and, when the time is right, arranges the refinance that gets them onto a sustainable footing. Our home-loan service is at no cost to you in most cases.
Common mistakes
- Waiting until several payments are missed. Hardship works best before arrears build.
- Not putting the notice in writing. The 21-day clock and the enforcement pause run from the notice.
- Accepting a pause without a plan for the end. Capitalised interest and a lump-sum catch-up can be worse than reduced payments.
- Paying other debts before the mortgage. Secured debt on your home should come first; a financial counsellor can help prioritise.
- Not complaining to AFCA when refused. Many refusals are overturned or renegotiated.
Frequently asked questions
What are my rights if I can't pay my mortgage?
You can give your lender a hardship notice under section 72 of the National Credit Code. The lender must respond within 21 days, cannot start enforcement while considering it, and must give reasons and AFCA details if it refuses. Before any enforcement, you must also receive a default notice with at least 30 days to catch up. Free financial counselling is available on 1800 007 007.
Does a hardship arrangement affect my credit score?
A hardship arrangement can appear on your credit report as financial hardship information for 12 months. Repayments made under the arrangement are recorded as met, and no default is listed if you keep to the terms. Lenders can see the hardship flag when you apply for new credit, but it is far less damaging than missed payments or a default, which stays on file for 5 years.
How long does a lender have to respond to a hardship request?
Twenty-one days from your notice, or 21 days from receiving any information the lender reasonably requested within the first 21 days. The response must be in writing. If the lender agrees, it must send written details of the variation within 30 days. If it doesn't respond in time, that is itself a breach you can raise with AFCA.
Can the bank repossess my house while I'm in hardship?
Not while a hardship notice is being considered, and not for a short period after a refusal. Even outside hardship, a lender must serve a default notice giving at least 30 days to remedy, and needs a court order to take possession of residential land if you don't leave voluntarily. Lodging a complaint with AFCA also generally pauses enforcement.
Can I refinance while in financial hardship?
Usually not while an arrangement is active, because lenders require evidence that you can service the new loan. Once you are back on full repayments and your income has stabilised, refinancing to a lower rate, a longer term or a consolidated loan can be the long-term solution. A broker can tell you which lenders will consider your history and when.
Talk to GNT Finance
If repayments are getting hard, talk to us before they become impossible. GNT Finance can help you approach your lender, understand the arrangement offered, and plan a refinance once you're back on your feet. Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.