- Losing a job while holding a mortgage creates immediate financial and emotional stress, making safety nets and lender support critical.
- Early action helps borrowers manage repayments until re‑employment.
Losing a job can be one of life’s big stressors, especially when you’re paying off a home loan.
Retrenchment, redundancy, or workplace dismissals are often entirely unexpected, sending mortgage holders into a blind panic about servicing their loan repayments.
While Australia's unemployment rate has remained below pre-COVID levels for some years, it's expected to climb by the end of 2026.
For those who lose their jobs or find it difficult to secure a new one, the financial and emotional strain of meeting mortgage repayments can be overwhelming. This highlights the importance of safety nets, lender support, and careful financial planning.
What should you do if you lose your job and have a mortgage?
1. Check your entitlements
The first step an employee should take is to ensure they are being paid the correct entitlements from their previous employer. The Fair Work Ombudsman sets out rights and obligations regarding notice periods, final pay provisions, and redundancy entitlements when employment ends.
There are different rights under the terms of an employee’s appointment, as well as when a position has been made redundant or a business becomes bankrupt.
Services Australia also offers advice for the recently unemployed, including how to access government support payments according to eligibility. However, even when eligibility is established, Legal Aid Queensland says it is generally around eight weeks before Centrelink payments begin.
2. Time for the emergency savings fund
Ideally, home loan holders should have an emergency savings fund set aside for such occasions to tide them over until they find their feet again.
The latest household savings figures, released in March 2026, show Australian households were able to save 6.9% of their income over the quarter to December 2025. However, with the cost-of-living crisis, fuelled by rising interest rates and inflation, many Australians have been dipping into their savings to meet their mortgage repayments and living expenses.
Understandably, some homeowners may feel the squeeze if their income stream is unexpectedly halted.
3. Make a budget
Australia’s largest home lender, the Commonwealth Bank of Australia, recommends the newly unemployed make a budget for the next three months, listing all essential expenses. The bank says it’s also a good opportunity to distinguish what costs are needs and what are wants. Even if savings cover the next three months of costs, CommBank recommends cutting back on non-essential expenses anyway to provide breathing room.
It also suggests considering short-term work to help make ends meet during the job-hunting period. Even if short-term work just covers the grocery bills, it’s money that won’t have to come out of savings or be repaid further down the line.
Other places to seek short-term financial assistance can include a partner, family, or friends. However, many people may feel reluctant to ask for help from personal contacts. Losing a job and facing financial pressure as a result is often accompanied by feelings of shame and guilt. However, there is a viable alternative.
Savings.com.au's two cents
Losing a job can be a shock, bringing short-term financial and emotional stress. But in most cases, it doesn’t lead to long-term unemployment.
Research from Seek, Australia’s leading job site, shows that redundancy is rarely viewed negatively by prospective employers. Hang in there. While the transition period may be difficult, many individuals are able to re-enter the workforce in a relatively short time.
Should I let my lender know that I lost my job?
Yes, a good place to seek assistance is the lenders themselves. Community legal group Financial Rights Legal Centre says many banks and non-bank lenders routinely consider what are called ‘hardship variation’ requests.
A hardship variation is generally a temporary arrangement with a lender until a borrower can get back on their feet. These short-term variations to the terms of a loan are designed to cover a few months until normal repayments resume. Under a hardship request, lenders may consider:
postponing or reducing repayments for a few months
reducing or freezing the interest rate for a few months
extending the term of the loan so the missed payments are added to the end of the loan
waiving default or other penalty fees
Even if the loan was taken out with another person, a borrower can still ask for a hardship variation even if the joint loan holder doesn’t agree. When applying for a variation, the Financial Rights Legal Centre advises having a plan for how and when normal repayments can resume.
What to know about hardship requests
A hardship variation will not fix any late payments already reported to the consumer credit reporting agency. Any late payments remain on a person’s credit report for two years from the time they were reported.
This is why it’s imperative to ask for a variation as early as possible, either via phone or email. It’s advised to keep records of all dealings and correspondence with the lender. Bear in mind, too, that many lenders are legally required to work with people in financial hardship. These include:
banks, credit unions, and building societies
members of the Mortgage and Finance Association of Australia
members of the Australian Financial Complaints Authority (ACFA). (All consumer lenders are members.)
How do lenders generally respond?
A lender may or may not agree to a hardship variation or request more information. Sometimes a lender may propose an alternative variation to what was requested.
In any case, it’s essential to keep a record of the decision and get in writing the exact conditions of any variations granted. These may include the amount and frequency of repayments, interest or fees charged, start and end dates, and what happens after that time.
If a lender doesn’t agree to a request, it is obliged to explain why and also how to make an internal complaint. It also must advise a borrower of their right to complain to the watchdog body, the Australian Financial Complaints Authority (AFCA).
If the lender doesn’t respond within 21 days (as consumer credit lenders are obliged to do by law), it’s best to go back to the lender. If that is unsuccessful, the matter can be pursued via AFCA.
What if the income in your new job doesn’t meet the income of your old one?
If a borrower’s income level is not as high as it was previously, their home loan can be refinanced with the existing lender, or by looking around for a more suitable deal among other lenders.
A homeowner might also consider renting out the property if they can arrange an alternative living situation that allows them to cover their mortgage repayments and live with lower costs, for example, moving in with family or shifting to a lower-cost rental area.
Alternatively, the homeowner may consider selling, ideally when the sale provides a lump sum of cash to pay off the existing home loan and leave enough left over to purchase another property where the loan is more easily serviced at the new income level. However, there are many steps to take before considering such a move.