Hardship Mortgage Loan: How to Pause or Defer Your Home Loan in Australia

According to ASIC’s Moneysmart research (June 2024), 47% of Australian adults with debt, or around 5.8 million people, have struggled to make repayments in the past 12 months. If you’re one of them, you’re far from alone. 

And here’s the thing, most people don’t realise: requesting a hardship mortgage loan arrangement isn’t a sign of failure, and it won’t automatically damage your credit record. Under Australian law, it’s a legal right. Your lender is obligated by the National Credit Code to consider every hardship request.

This article explains what mortgage hardship assistance looks like, how to ask for it, what happens to your credit file, and what to do if the pause alone isn’t enough.

What Is Mortgage Hardship Assistance?

A hardship variation is a formal change to your loan terms because you can’t reasonably meet your current repayments. It’s governed by Section 72 of the National Credit Code – the legislation that applies to all regulated consumer credit contracts entered into from March 2013 onwards, regardless of loan size.

Common triggers include:

• Job loss or reduced hours
• Illness or injury
• Separation or divorce
• Family violence
• Natural disaster
• Business downturn
• Ongoing cost-of-living pressure

You don’t need to be in crisis to apply. If you can see a problem coming, like your fixed rate rolling off, or you’ve just gone down to one income, contacting your lender early gives you the most options. Financial hardship mortgage assistance is designed for exactly these situations.

What Mortgage Payment Relief Options Can You Ask For?

Lenders have a range of tools available under mortgage payment relief arrangements. The most common are:

Full repayment pause (deferral)

Repayments are suspended for an agreed period, typically one to six months. This buys breathing room, but interest keeps accruing – your loan balance will be higher at the end of the pause than when it started. Many borrowers miss this, so it’s worth understanding before you commit.

Reduced repayments

You pay a lower amount each month while you stabilise your finances, then return to normal repayments.

Interest-only period

You cover the interest component only, temporarily reducing your monthly commitment.

Loan term extension

Spreading your remaining balance over a longer period reduces your ongoing repayments.

Capitalising arrears

Any missed payments are added to your loan balance and spread out, removing the immediate pressure of catching up.

Fee waivers or reduced interest

Some lenders will waive default fees or reduce the interest rate for the hardship period.

Each of these is a form of financial hardship mortgage assistance, and what’s available will depend on your lender and your specific situation. The key point: there are more levers to pull than most borrowers know about.

How to Apply for Financial Hardship Mortgage Assistance

The process is more straightforward than people expect. Here’s how it works:

Step 1: Contact your lender’s hardship team early

Don’t wait until you’ve missed payments. The earlier you make contact, the more options are on the table. Call the main number and ask specifically for the hardship or financial assistance team.

Step 2: Submit a hardship notice

This can be done by phone, via an online form on your lender’s website, or in writing. There’s no specific format required; you’re simply notifying the lender that you’re experiencing, or expect to experience, difficulty making repayments.

Step 3: Provide supporting information

Be ready to explain your income and expenses, what caused the hardship, how long you expect it to last, and what arrangement you’re proposing. You don’t need to have a perfect answer to every question; lenders just need enough to assess your situation.

Step 4: Wait for a response

Your lender must respond in writing within 21 days. This is a legal requirement under the National Credit Code, not a courtesy.

Step 5: Get the arrangement in writing

If approved, make sure the terms are confirmed in writing before you change how you’re paying.

Step 6: If declined, escalate

Your lender must give reasons if they refuse. If you’re not satisfied, you can take the matter to the Australian Financial Complaints Authority (AFCA) at no cost.

The 21-day rule matters. In August 2025, the Federal Court ordered NAB and its subsidiary AFSH to pay a $15.5 million penalty after failing to respond to 345 hardship applications within the 21-day timeframe required by law. The court found the failures left customers unaware of the outcome of their applications at a time when they needed clarity most. This precedent confirms that the timeframe is enforceable; your lender can’t simply leave you waiting.

What Happens to Your Credit File?

This is the question most people are quietly worried about, and it’s worth addressing clearly.

Simply asking about hardship, or having a conversation with your lender, will not appear on your credit file at all. Once a hardship arrangement is formally agreed, a financial hardship indicator may appear next to your repayment history for the period of the arrangement and stays on your file for 12 months from each month it’s reported. This indicator doesn’t affect your credit score directly, but it does show future lenders that an arrangement was in place.

Here’s the important comparison: missing payments without any arrangement in place is significantly worse. Missed payments can be listed as defaults, and defaults stay on your credit file for five years. Acting early and arranging a hardship mortgage loan variation is always the better outcome for your credit record.

The 2022 hardship reporting reforms changed how this information is recorded, so if you’ve heard older advice suggesting hardship arrangements don’t appear at all, it’s worth knowing the rules have changed.

When a Hardship Pause Isn’t Enough

Sometimes a short-term pause solves the problem. But if the financial pressure is ongoing, if you have a permanent income reduction, a long-term health issue, or a structural change in your household budget, a temporary deferral might just delay the stress rather than resolve it.

In those situations, it’s worth exploring:

• Refinancing – If your current loan has a rate or structure that no longer suits your situation, moving to a different product through a refinance home loan broker could reduce your ongoing repayments meaningfully.
• Debt consolidation – Rolling multiple debts into a single lower-rate loan can reduce total monthly outgoings.
• Selling on your terms – If the loan isn’t sustainable long-term, selling before the lender moves to enforce is always better than a forced sale. It gives you more control and more time.
• Free financial counselling – The National Debt Helpline (1800 007 007) connects you with qualified financial counsellors at no charge. They can help you map out your options, negotiate with lenders, and work out a realistic path forward.

It’s also worth knowing that if you’re a first-home buyer navigating this, there may be government support options worth revisiting, including the first home loan deposit scheme, though your broker can advise what’s relevant to your specific situation.

How a Mortgage Broker Can Help

Dealing directly with your lender during financial stress isn’t always straightforward. A broker can act as an intermediary – liaising with the hardship team on your behalf, helping you frame your situation clearly, and making sure the right information is in front of the right people.

Beyond the immediate hardship application, a broker can assess whether your current loan is actually the right fit for where you are now. If refinancing to a lower rate or a more flexible structure would reduce your repayments enough to remove the hardship entirely, that’s often a better long-term outcome than a pause followed by a return to the same pressure.

At Go Mortgage, we work across 30+ lenders, and we’ve helped clients in all kinds of situations, not just those buying their first home or upgrading. If you’re feeling the pressure on your repayments and want an independent view of your options, our team is happy to have that conversation.

As a finance broker on the Gold Coast, we can look at your full picture and give you a clear sense of what’s available, without any obligation to proceed.

Ready to talk through your options? Call us on 1300 855 244 or book a free discovery meeting at a time that suits you.

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Disclaimer: This article is general in nature and does not constitute financial advice. Please speak with a qualified professional about your individual circumstances.