You cannot simply stop paying a mortgage without consequences, but a lender may agree to temporary hardship assistance. Depending on the circumstances, this could include a reduced repayment, payment plan, temporary deferral or another loan variation. Approval, duration and cost depend on the lender’s assessment and the arrangement offered.
Contact the lender’s hardship team before missing payments if possible. A repayment pause is not debt forgiveness: interest may continue, the balance may increase and the loan may take longer or cost more to repay.
What is a mortgage payment pause?
Terms such as mortgage pause, repayment holiday, payment deferral and mortgage suspension are used informally. In practice, the arrangement is a form of financial hardship assistance agreed with the lender.
The lender may temporarily:
- reduce the required repayment;
- defer part or all of a repayment;
- change the payment date or frequency;
- extend the loan term;
- capitalise arrears into the loan balance; or
- set a temporary repayment plan.
The suitable option depends on whether the difficulty is short term, the amount the borrower can afford and whether the position is likely to improve.
What happens if you stop paying without an arrangement?
Stopping payments without contacting the lender can create arrears, late or default interest, fees, credit-reporting consequences and eventually enforcement action. The lender may send a formal default notice and, if the arrears are not resolved, take legal steps to recover the debt and possession of the property.
If a payment has already been missed, contact the hardship team immediately. Making a hardship request does not guarantee a particular outcome, but early contact generally provides more options than ignoring the account.
How financial hardship assistance works
When requesting assistance, be ready to explain:
- what caused the difficulty;
- whether it is temporary or ongoing;
- current income and essential expenses;
- other debts and commitments;
- what amount can realistically be paid; and
- when circumstances may change.
Moneysmart explains that a lender must consider a request for hardship assistance and must give reasons if it refuses. If more information is requested, provide it promptly and retain copies of all correspondence.
Only agree to a payment amount that is sustainable. If an arrangement becomes unaffordable, contact the lender again rather than silently missing the revised payment.
Does interest continue during a payment pause?
Often, yes. The exact treatment depends on the arrangement and loan contract. Interest that is not paid may be added to the loan balance. Interest can then be charged on the higher balance, increasing the total cost.
At the end of the pause, the lender may:
- increase repayments over the remaining term;
- extend the loan term;
- add the deferred amount to the balance;
- require a catch-up plan; or
- use another agreed variation.
Before accepting, ask for a written explanation of the new balance, repayment, term, interest treatment and fees.
Will hardship assistance affect a credit report?
Financial hardship information is treated differently from a default. Current Australian guidance states that a financial hardship arrangement itself does not affect the credit score, although the credit report can show hardship information linked to repayment history. That information generally remains for one year.
Repayment history, defaults and other information have separate reporting rules. Ask the lender how the proposed arrangement will be reported and obtain current information from the Office of the Australian Information Commissioner.
Potential benefits of a temporary arrangement
- Provides short-term cash-flow relief during illness, unemployment, separation or another disruption.
- Creates a documented plan rather than unmanaged missed payments.
- May prevent a temporary problem from escalating while the borrower reorganises finances.
- Allows time to claim insurance, return to work, sell an asset or make another sustainable change.
A benefit is most likely where the cause is temporary and there is a realistic plan for repayments after the assistance period.
Costs and risks
- Higher total interest: unpaid interest may increase the balance and future interest.
- Higher future repayments: deferred amounts may need to be recovered over the remaining term.
- Longer loan term: an extension can increase the total amount repaid.
- Reduced equity: a larger balance can reduce the owner’s share of the property value.
- No permanent affordability fix: a temporary pause may delay rather than resolve an ongoing income or expense problem.
- Property risk: unresolved arrears can progress to enforcement and possession.
Questions to ask before agreeing
- How long will the arrangement last?
- Will interest and fees continue?
- Will unpaid interest be added to the balance?
- What will the balance be at the end?
- Will repayments increase or will the term extend?
- How will the arrangement be shown on the credit report?
- Can partial payments be made during the pause?
- What happens if circumstances do not improve?
- Are there alternatives with a lower long-term cost?
- When will the arrangement be reviewed?
Alternatives to a full payment pause
Depending on the lender and circumstances, alternatives may include a smaller temporary reduction, a payment plan, changing the repayment date, using available offset funds, negotiating other bills or selling an asset. Accessing redraw or offset funds reduces the cash buffer and should not be automatic.
Refinancing is not a guaranteed hardship solution. A new lender must assess the application, and switching can add fees or extend the term. If repayments are already unaffordable, seek guidance before using more equity or taking a higher-cost loan.
If several debts are involved, read our debt consolidation home-loan guide for the security and term-reset risks.
What happens after a default notice?
A formal default notice is urgent. Moneysmart explains that it gives the borrower 30 days to make the missed payments plus the regular repayment. A hardship request can still be made at that stage.
If the lender begins court action or issues a possession notice, obtain legal advice immediately. Do not rely on a refinance being available before a court or settlement deadline.
Where to get free help
- Lender hardship team: contact it directly and request the decision and arrangement in writing.
- National Debt Helpline: free financial counselling on 1800 007 007.
- AFCA: free external dispute resolution if a complaint cannot be resolved with the lender.
- Legal Aid or a community legal centre: urgent assistance for default notices or court action.
See Moneysmart’s current mortgage-hardship guidance.
Frequently asked questions
Can I skip one mortgage payment?
Do not assume a payment can be skipped. Contact the lender first and obtain written agreement. Without an arrangement, the payment can become overdue.
How long can mortgage payments be suspended?
There is no universal period. The lender assesses the hardship request and may offer a temporary arrangement with review points.
Does a payment holiday reduce the amount owed?
No. It changes when payments are made. Interest may continue and the total amount owed can increase.
Can a broker approve a mortgage pause?
No. Only the lender can approve a hardship arrangement on its loan. A broker may discuss longer-term lending options, but cannot override the lender’s decision or guarantee a refinance.
Discuss the longer-term home-loan position
For immediate hardship assistance, contact the current lender first. GQ Finance can discuss longer-term home-loan options once the urgent position and affordable repayment level are clear, but a new loan remains subject to lender assessment.
Request a confidential discussion. Eligibility, verification, serviceability and responsible-lending requirements apply.
