Can you refinance if you're behind on your mortgage?
Yes, often. Mainstream banks rarely refinance a loan that's in arrears, but specialist lenders do it routinely. What they need to see:
- Enough equity to pay out your current loan, the arrears, any default interest and fees, and the costs of the new loan.
- Affordable new repayments. The refinance has to solve the problem, not delay it. That might mean consolidating other debts so your total monthly outgoings fall.
- A reason and a change. What caused the arrears, and what's different now: a new job, recovered health, a sold car, a budget that works.
- Time. Once a lender has started court action or taken possession, options shrink fast.
What happens when you miss mortgage repayments
- 1
Missed repayment
Your lender will contact you. Late fees and arrears start building.
- 2
Hardship request
You can ask for a hardship variation at any time. Your lender must respond in writing within 21 days.
- 3
Default notice
A lender can send a default notice once a repayment is overdue; many wait longer. It gives you at least 30 days to catch up.
- 4
Legal action
If the default isn't fixed, the lender can start court proceedings to take possession.
- 5
Possession and sale
The lender takes the home and sells it, often for less than you might have achieved yourself.
The earlier you step in, the more choices you have. Our guide on what to do if you're behind on your mortgage walks through each stage.
Your options, side by side
| Option | Good for | Watch out for |
|---|---|---|
| Hardship arrangement with your lender | Short-term setbacks, such as illness or job loss with a new job lined up | Missed repayments may still be reported; interest keeps accruing |
| Refinance with a specialist lender | Homeowners with equity whose income now supports the loan | Higher cost at first; needs a plan to refinance again later |
| Consolidate debts in the refinance | People whose total repayments are the real problem | Short-term debts become long-term; costs more over time unless you pay extra |
| Sell on your own terms | When the numbers just don't work | Selling yourself usually beats a lender's mortgagee sale |
Free, independent help is available from a financial counsellor through the National Debt Helpline on 1800 007 007. We're happy to work alongside them.
What you'll need
Arrears refinances move fastest when the paperwork is ready. Have your latest loan statement showing the arrears, any letters from your lender (especially a default notice), proof of your current income, bank statements and a list of your other debts. Most importantly, have an honest answer to 'what happened, and what's changed?'
Received a default notice?
A worked example
A couple fell four months behind after one partner was made redundant. He's now been in a new job for three months. Their bank has issued a default notice. They have solid equity in their home.
A specialist lender refinances their mortgage, clearing the arrears, the default interest and two credit cards at settlement. Their new monthly repayment is about what they paid before the redundancy, and the default process stops. They plan to refinance again once they've had 12 months of on-time payments.
What you’ll need
- Photo ID
- Latest home loan statement showing arrears
- Any letters or notices from your lender
- Proof of current income
- 3 to 6 months of bank statements
- A list of other debts and balances
- Council rates notice
Who it usually suits
- Homeowner with a mortgage in arrears
- Enough equity to clear the loan and costs
- Income that supports the new repayments
- A clear reason for the arrears, and what's changed
- No completed mortgagee sale
