Mortgage Repayment Pause — How to Apply for Hardship in Australia (2026)
A mortgage repayment pause — sometimes called a mortgage holiday or repayment deferral — allows you to temporarily suspend or reduce your home loan repayments during a period of financial difficulty. Here is how the process works, what it costs, and how to apply.
What Is a Mortgage Repayment Pause?
A repayment pause is a temporary arrangement where your lender agrees to defer your scheduled repayments for a set period — typically 1 to 6 months, sometimes up to 12 months in exceptional circumstances.
During the pause:
- No principal and interest repayments are required (or reduced repayments)
- Interest continues to accrue on your outstanding balance
- The accrued interest is typically added to your loan balance (capitalised)
- At the end of the pause, repayments resume — usually at a higher amount to account for the increased balance and/or shorter remaining term
This is not a free period — you will pay more interest over the life of the loan as a result of the pause.
Who Qualifies for a Repayment Pause?
Lenders assess hardship applications individually. You generally need to demonstrate:
- A genuine temporary financial hardship
- A reasonable prospect of resuming repayments after the pause period
- That the hardship is due to circumstances beyond your control (illness, job loss, relationship breakdown, natural disaster, significant cost-of-living impact)
Hardship does not require you to have already missed payments — you can apply in anticipation of difficulty.
How to Apply for a Mortgage Repayment Pause
Step 1: Contact your lender’s hardship team
Do not call the general customer service line. Ask specifically for the hardship or financial assistance team.
Step 2: Request a financial hardship variation
Use this language: “I would like to request a financial hardship variation under the National Credit Code.”
Step 3: Prepare supporting documentation
Depending on the reason for hardship:
- Job loss: redundancy letter, Centrelink notification
- Illness: medical certificate, letter from treating doctor
- Separation/divorce: evidence of change in circumstances
- General financial hardship: bank statements, income and expense summary
Step 4: Complete the lender’s hardship application form
Most lenders have online forms or paper applications. Be specific about:
- The reason for hardship
- How long you expect to need assistance
- Your expected income during and after the pause
- Your current monthly income and expenses
Step 5: Receive and review the offer
The lender must respond within 21 days (NCCP Act requirement). Review the terms carefully — including the revised repayment amount after the pause ends.
Step 6: Confirm in writing
Get the hardship arrangement confirmed in writing before relying on it.
The Financial Impact of a Repayment Pause
Worked example:
- Outstanding loan: $550,000
- Interest rate: 5.90% (variable)
- Monthly repayment: $3,627 (25 years remaining)
- Pause period: 6 months
| Impact | Amount |
|---|---|
| Interest accrued during 6-month pause | ~$16,225 |
| Loan balance after pause | ~$566,225 |
| New monthly repayment (24.5 years remaining) | ~$3,780 |
| Extra repayment vs original | ~$153/month |
| Total additional interest (life of loan) | ~$20,000–$25,000+ |
Figures are indicative estimates only — actual figures depend on your specific loan terms.
The pause comes at a real cost. However, compared to missing payments, damaging your credit file, and facing enforcement, a formal pause is often the right financial decision.
Interest-Only as an Alternative
Rather than a full repayment pause, some lenders offer conversion to interest-only repayments for a temporary period (typically 6–24 months).
With interest-only:
- You pay only the interest component (no principal reduction)
- Repayments are lower (often 30–40% less than P&I)
- Loan balance does not reduce during this period
- Less costly than a full pause (no interest capitalisation)
- Easier to qualify for (no formal hardship assessment in all cases)
→ See Interest-Only Home Loans Explained for more detail.
Repayment Pause vs Redraw vs Offset
A repayment pause, using redraw, and using an offset account are three different things:
| Method | How it works | Risk |
|---|---|---|
| Repayment pause | Lender formally defers repayments | Interest capitalisation |
| Redraw | Withdraw extra repayments you’ve made ahead | Reduces equity buffer |
| Offset account | Draw down cash savings to cover repayments | Depletes savings, increases net interest |
Using redraw or offset can bridge short-term gaps without needing a formal hardship application — useful for 1–2 months of difficulty. For longer periods, a formal arrangement is generally better.
Frequently Asked Questions
Will a repayment pause affect my credit score?
A formal hardship arrangement (properly documented with your lender) should not result in missed payment listings during the pause period. Acting before you miss payments is important — missed payments before a hardship arrangement is confirmed may still be reported.
Can I end the repayment pause early?
Yes — you can resume repayments at any time during the pause. Contact your lender to end the arrangement and confirm the new repayment schedule.
Can I apply for a second pause if my circumstances don’t improve?
Possible — but lenders assess each request individually and a repeated hardship pattern may indicate that the loan is not sustainable at current terms. Your lender may recommend a more permanent solution such as a loan restructure, extended term, or debt management plan.
Related Guides
- Mortgage Hardship Provisions — Your Legal Rights
- What to Do If You Can’t Make Your Mortgage Repayments
- Mortgage Stress in Australia — Signs, Stats and Solutions
- Mortgage Hardship Hub
This article provides general information about mortgage repayment pauses in Australia. This is not financial or legal advice. For free financial counselling, call the National Debt Helpline on 1800 007 007. Find a licensed mortgage broker through MoneySmart.