I’ve received a home loan default notice from my bank. What should I do?

Updated 12 November 2020

A summary of your options after you receive a home loan default notice can be found in this flowchart. Note, this factsheet will not apply if your bank has already started court proceedings against you. If your bank has started court proceedings, seek legal advice immediately.  

This fact sheet covers:

  • Default notices  
  • What to do if you get a home loan default notice 
  • How to ask for a change to your home loan by giving your bank a hardship notice 
  • How to ask for more time by giving your bank a postponement notice 
  • What to do if you’re unhappy with the bank’s decision 
  • Where to get help  

What is a default notice?

A default notice, also called a section 88 Notice, is a notice that a bank must give you before the bank takes enforcement action against you because you have defaulted on your home loan. The bank must also give you a default notice before it calls for the repayment of your entire home loan. 

What does a default notice look like?

default notice will be clearly labelled and must include details such as:

  • that you are in default of your home loan;
  • how you can fix the default
  • how long you have to fix the default
  • when enforcement will start if you don’t fix the default
  • what options you have to negotiate with the bank
  • the lender’s phone number

A default notice is often accompanied by a notice under the Transfer of Land Act (Vic) (TLA Notice). It is a requirement that a bank issue a notice under the TLA before it takes action to sell a mortgaged property. 

What should I do if I get a default notice?

Act quickly.  First, check the date of the default notice and how long you have to fix the default. The bank must give you at least 30 days to fix the default. 

You must not ignore a default notice. If you do not fix the default or take steps to negotiate with the bank within 30 days, the bank can take action to repossess and sell your home.  

If possible, fix the default. If you fix the default within 30 days, the bank can’t take any more action. 

If you are experiencing financial hardship and you cannot afford to fix the default, you have three options. You can: 

  1. Ask the bank to change your home loan repayments 
  2. Ask the bank to postpone enforcement 
  3. Ask the bank to change your home loan repayments and ask the bank to postpone enforcement  

You must take these steps within 30 days of the default notice.

  What if the default notice is wrong?

If you think the default notice doesn’t include enough information, contains mistakes or was wrongly sent to you, you should contact the bank as soon as possible. You should not ignore the default notice even if you think it is wrong.

How can I ask for a change to my home loan repayments?

You can simply ring the number on the default notice or write to your bank and ask for a change to your home loan repayments. This request is called “a hardship notice 

Its best that you give your hardship notice in writing to avoid misunderstanding and so you have a record. If you make your hardship notice over the phone you should make notes of what was said. 

When you give your hardship notice you should include: 

  • Details of your home loan 
  • How you want to change your home loan (for example, extending the loan term and reducing each payment or postponing payments for a period).  
  • Why you need a change to your home loan. The bank is unlikely to accept your request unless you have good reasons (for example, you lost your job or have suffered a serious illness)  
  • If you are a vulnerable customer (for example, because you are elderly or have a disability) 
  • How much you can afford to repay & how long the hardship is likely to last  

The bank will not accept your hardship notice unless you can show that you will be able to repay your home loan if the changes are made. Its best that you speak to a financial counsellor to help you work out what change to your repayments will suit you best. You can call the National Debt Helpline 1800 007 007 for free financial counselling. 

If your circumstances have permanently changed and a change to your repayments won’t fix your problem, you should speak to a financial counsellor about your options. You can call the National Debt Helpline 1800 007 007 for free financial counselling.

What happens after I give a hardship notice?

The bank will assess your hardship notice and make a decision. The bank can ask for more information within 21 days of receiving your hardship notice. You must provide the information within 21 days of receiving the request. 

The bank must tell you its decision: 

  • within 21 days of receiving your hardship notice if the bank doesn’t ask for more information 
  • within 21 days of receiving any information that the bank asks for 

If the bank asks for more information and you don’t provide the information, the bank must tell you it’s decision within 28 days after it asked you for more information.

What can the bank do?

The bank can agree to change your repayments but it doesn’t have to.  

If the bank agrees to change your repayments, it will send you a notice explaining the changes. 

The bank won’t agree to change your repayments if the bank thinks you: 

  • Don’t have a reasonable reason for not being able to make your repayments; or  
  • Won’t be able to make repayments even if your repayments were changed. 

If the bank decides not to change your repayments, it must send you a notice explaining why it has made its decision. The bank cannot start enforcement proceedings within 14 days of sending you its notice. 

How can I ask the bank for more time?

You can simply ring the number on the default notice or write to your bank and ask it to postpone enforcement. This request is called “a postponement notice”. You must give the postponement notice within 30 days of the default notice.  

Its best that you give your postponement notice in writing to avoid misunderstanding and so you have a record. If you give your postponement notice over the phone, you should make notes of what was said.You should provide reasons for your request, for example, because you need more time to enter a payment arrangement with the bank.  

The bank doesn’t have to agree to your request. If it doesn’t agree to your request, the bank must send you a notice explaining why it has made this decision. The bank cannot start enforcement proceedings within 14 days of sending you their notice. 

  Tip: You can give your bank a hardship notice and a postponement notice at the same time.

What if the bank rejects my hardship notice or my postponement notice?

If you’re not happy with the bank’s decision, or the bank hasn’t replied to your hardship notice or postponement notice within 21 days, you can complain to the Australian Financial Complaints Authority (AFCA). The bank can’t take start or continue legal proceedings against you while AFCA is considering your complaint. You should read our factsheet on resolving problems with your bank at AFCA before making your complaint.  

You can also apply to a Court  if you are not happy with the bank’s decision. However, applying to court can be complex, risky, expensive and time consuming. You should get legal advice before taking this step. You should make a complaint to AFCA before you apply to the Court.  

  What if my bank has given me a mortgage holiday because of COVID-19?

The bank should contact you before the mortgage holiday ends. However, if you can’t afford to start making repayments again, you should contact the bank as soon as possible to try to negotiate an arrangement. For example, you could ask the bank to extend the mortgage holiday for a few more months or ask if you can start with interest repayments only. The sooner you start to negotiate with the bank, the better your chances of finding a solution. 

Where can I get help?

If you are defaulting on your home loan, you are likely experiencing financial problems. It’s extremely important that you get financial counselling to help you work out the best solution. You can call the National Debt Helpline 1800 007 007 for free financial counselling. Financial counsellors will also be able to help you negotiate with your bank.  

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