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Local Knowledge Finance

I am self-employed and struggling with my mortgage repayments. What can I do?

Short answer

Contact your lender early, before you miss a payment, and ask about financial hardship. Lenders must consider hardship requests, and options can include a short pause, reduced repayments or a longer term. Free help is available from the National Debt Helpline. Refinancing is only worth exploring if you can pass a new lender assessment.

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This answer is awaiting review by James Chee CPA. Written by Local Knowledge Finance editorial team. Check the dated sources below and talk to a broker about your own situation.

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What lenders will want to see

  • Moneysmart advises contacting your lender as soon as you think you may have trouble paying, and explains how to ask for a hardship arrangement. [Moneysmart (ASIC)]
  • Moneysmart lists the changes a lender may agree to under hardship, such as pausing or reducing repayments for a period or extending the loan term. [Moneysmart (ASIC)]
  • If you cannot resolve a hardship request with your lender, you can complain to AFCA, a free and independent service. [AFCA]
  • The National Debt Helpline offers free, confidential financial counselling. [National Debt Helpline]

Who this may suit

  • Self-employed owners whose income has fallen but who expect the business to recover
  • Borrowers who want to understand every option before missing a repayment

Who it may not suit

  • Anyone expecting a new loan to solve a cash-flow problem that is still getting worse
  • Anyone looking for tax or business-restructuring advice: speak to your accountant or a financial counsellor

Your options, including not borrowing

  • Ask your current lender for a hardship arrangement. This does not need a new loan application. [Moneysmart (ASIC)]
  • Speak to a free financial counsellor through the National Debt Helpline before making big decisions. [National Debt Helpline]
  • Explore a refinance or restructure only if your income can pass a new assessment. Policies vary by lender and change; we check current policy honestly, including when the answer is no.
  • Consider selling or downsizing if the loan is no longer affordable in the long term. Doing nothing is not a plan, but borrowing more is not always the answer either.

Risks to weigh

  • Missed repayments can be recorded on your credit report and make future borrowing harder. [Moneysmart (ASIC)]
  • Hardship arrangements can mean more interest overall, because interest usually keeps accruing. [Moneysmart (ASIC)]
  • Adding new debt while income is falling can make the position worse.

Next steps

  1. 1Work out what you can realistically pay each month for the next few months.
  2. 2Call your lender, ask for the hardship team and keep a note of the date and what was agreed.
  3. 3Call the National Debt Helpline on 1800 007 007 for free financial counselling.
  4. 4Talk to us if you want an honest view on whether a refinance is possible.

Common follow-up questions

A hardship arrangement can be noted on your credit report, but Moneysmart explains that missed repayments are generally more damaging. Ask your lender how the arrangement will be reported, and check the Moneysmart guidance on credit reports.
Possibly, if a lender can assess your current or recent income and you pass its checks. If you would only pass with optimistic figures, refinancing may not be the right step. We will tell you plainly if it is not.
Ask for the reasons in writing. You can lodge a complaint with your lender and, if it is not resolved, with AFCA, which is free to use.

Sources

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General information about credit only. It is not tax, financial, superannuation or Centrelink advice and does not take your objectives, financial situation or needs into account. Lender policies change; any loan is subject to lender assessment and approval.

Ding Financial Pty Ltd t/a Local Knowledge Finance, Corporate Authorised Credit Representative 517980 of Global Mutual Funds Pty Ltd (ACL 222640). Sydney · 02 8338 8900 · [email protected]

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