Mortgage Holiday — Can I Pause My Home Loan Repayments? (2026)
A “mortgage holiday” (also called a repayment pause or repayment deferral) allows eligible borrowers to temporarily stop or reduce their home loan repayments for a set period. While it can provide short-term financial relief, it is not free — paused payments accumulate interest, and you will owe more at the end of the pause period.
What Is a Mortgage Holiday?
A mortgage holiday is an arrangement with your lender that allows you to:
- Pause all repayments for a defined period (typically 1–6 months)
- Reduce repayments to interest-only for a period
- Defer part of repayments while continuing to pay the interest component
During a pause, interest continues to accrue on your outstanding balance. The unpaid interest is typically capitalised (added to your loan balance), increasing the total amount you owe.
When Can You Get a Mortgage Holiday?
Lenders are not required to offer mortgage holidays — they are a discretionary arrangement. Lenders typically consider applications from borrowers experiencing:
- Temporary financial hardship (job loss, illness, reduced income)
- Parental leave (reduced income period)
- Natural disaster impact
- Planned career break or overseas relocation
- Other short-term disruption to income
Some lenders also offer repayment pauses as a product feature for borrowers who have made significant extra repayments and have built up a sufficient credit buffer.
The Real Cost of a Mortgage Holiday
Pausing repayments is not free — interest continues to accrue.
Example: $600,000 loan at 6%, 25 years remaining — 3-month repayment pause
- Monthly repayment: $3,597
- Interest accruing per month: ~$3,000 (on $600,000 at 6%)
- Interest accrued during 3-month pause: ~$9,000
- Amount added to loan balance: ~$9,000
After the pause, your loan balance is approximately $609,000 — not $600,000. Your repayments then apply to a higher balance, and the loan takes longer to pay off.
6-month pause on $600,000:
- Interest accrued: ~$18,000
- Added to loan balance: ~$18,000
- Additional repayments required afterwards to compensate: potentially years of extra payments
How to Apply for a Mortgage Repayment Pause
- Contact your lender directly — call, online banking message, or branch
- Explain your situation and the duration of pause requested
- Provide documentation if required (employer confirmation of parental leave, medical certificate, redundancy notice)
- Receive written confirmation of the pause terms — including how interest is treated
Important: Lenders assess each application individually. There is no legal right to a mortgage holiday — it is at the lender’s discretion. However, the NCCP Act requires lenders to consider hardship applications seriously.
Financial Hardship — Broader Protections
If you are experiencing genuine financial hardship (not just a planned career break), you may have access to broader protections:
NCCP Act hardship provisions: Under the National Consumer Credit Protection Act 2009, if you are unable to meet repayments due to illness, unemployment, or other reasonable cause, you can request a hardship variation — which may include:
- Extending the loan term (lower repayments)
- Deferring payments for a set period
- Reducing the repayment amount
If the lender does not agree to a reasonable hardship variation, you can escalate to AFCA (Australian Financial Complaints Authority) at afca.org.au.
The ABA (Australian Banking Association) and individual lenders also maintain financial hardship assistance programs. Call your lender’s financial hardship team directly — not the general enquiries line.
Mortgage Holiday vs Interest-Only Switch
An alternative to a full repayment pause is switching to interest-only repayments temporarily.
| Repayment pause | Switch to interest-only | |
|---|---|---|
| Repayments required | None | Interest only (no principal) |
| Effect on loan balance | Balance increases (interest capitalises) | Balance stays the same (not reduced) |
| Cost | Interest compounds on the deferred interest | Less costly than full pause |
| Term | 1–6 months typically | Often requires refinancing/variation |
An interest-only switch is generally less costly than a full pause because interest doesn’t compound on itself.
Alternatives to a Mortgage Holiday
Before requesting a repayment pause, consider:
- Redraw — if you’ve made extra repayments, redrawing them provides cash without pausing the loan
- Offset account — access funds from your offset without touching the loan
- Interest-only switch — reduces repayments without capitalising interest
- Loan term extension — refinancing to extend the term reduces minimum repayments
- Budget review — non-essential expenses vs mortgage priority
- Government financial assistance — Centrelink payments for eligible situations
Frequently Asked Questions
Does a mortgage holiday affect my credit score?
A formally approved repayment pause agreed with your lender generally does not negatively affect your credit score — it is a lender-agreed arrangement, not a missed payment. However, if you simply stop making repayments without lender agreement, missed payments will be recorded and damage your credit file. Always obtain formal approval before pausing.
Can I get a mortgage holiday if I’m not in financial hardship?
Some lenders offer discretionary repayment pauses for borrowers who have made significant extra repayments and have built a buffer — for example, a 3-month pause funded by the buffer they’ve built up. These are product-specific features — ask your lender.
How long can a mortgage holiday last?
Most lender-approved pauses run for 1–6 months. In extraordinary circumstances (such as the COVID-19 period in 2020), lenders granted pauses of up to 6–12 months through industry-wide programs. Standard commercial pauses are typically 1–3 months.
Related Guides
- How to Pay Off Your Mortgage Faster
- Redraw Facility Explained
- What Is a Mortgage Offset Account?
- Mortgage Repayment Hub
This article provides general information about mortgage repayment pauses in Australia. Lender policies and hardship provisions vary. If you are experiencing financial hardship, contact your lender’s financial hardship team directly. Additional support is available through AFCA (afca.org.au) and the National Debt Helpline (ndh.org.au, 1800 007 007). For advice tailored to your situation, speak with a licensed mortgage broker or financial counsellor. Find one through MoneySmart.