Pause Home Loan Repayments? Here's How to Regain Control

Life can throw unexpected challenges your way, whether it's a sudden illness, job loss, or other financial difficulties. If you're a homeowner struggling to meet your mortgage repayments, you might be wondering, "Can I pause my home loan repayments?" Understanding your options can provide peace of mind and a path forward during tough times.

Understanding Pausing Home Loan Repayments

Pausing your home loan repayments, often referred to as a repayment holiday or mortgage deferral, is a temporary measure that allows you to take a break from making regular mortgage payments. This can be a lifeline during financial hardship, but it's essential to understand how it works and the potential long-term implications.

When you pause your repayments, the interest on your loan continues to accumulate, which means you'll end up paying more over the life of the loan. Additionally, not all lenders offer this option, and the terms can vary significantly.

Current Market Information and Options

As of 2026, the Australian home loan market is diverse, with interest rates typically ranging from 6.49% to 12%. Lenders have varying policies on repayment pauses, so it's crucial to check the specific terms with your lender.

Eligibility for pausing repayments often includes demonstrating financial hardship, which can be due to unemployment, medical emergencies, or other significant life changes. Generally, a temporary pause can last from a few months up to a year, depending on the lender's policy.

Here's a comparison of different lender options regarding repayment pauses:

Steps to Pause Your Home Loan Repayments

If you're considering pausing your home loan repayments, follow these steps to ensure a smooth process:

1. Assess Your Financial Situation: Before contacting your lender, take a close look at your finances to determine how long you may need a break from payments.
2. Contact Your Lender: Reach out to your lender as soon as possible to discuss your situation. Lenders on Esteb and Co's panel, which includes 83+ lenders, may offer different solutions.
3. Provide Documentation: Be prepared to provide evidence of financial hardship, such as medical certificates or proof of unemployment.
4. Understand the Terms: Ensure you fully understand the terms of the repayment pause, including how interest will be handled.
5. Consider Alternative Options: If a repayment pause is not feasible, discuss other options such as refinancing with a lower interest rate or extending the loan term.
6. Get it in Writing: Once an agreement is reached, ensure you receive written confirmation from your lender detailing the terms of the pause.

Tips and Considerations

Here are some expert tips to keep in mind when considering a repayment pause:

• Evaluate the Long-term Costs: While pausing payments can provide short-term relief, remember that interest continues to accrue, potentially increasing the total cost of your loan.
• Explore Other Financial Assistance: Look into government assistance programs or financial counselling services that might offer additional support.
• Communicate Proactively: Keep an open line of communication with your lender. Proactive communication can lead to more favourable terms and options.
• Review Your Budget: Use this time to reassess your financial priorities and budget to ensure you can resume payments smoothly once the pause ends.
• Consider Professional Advice: Consulting with a mortgage broker, such as Esteb and Co, can provide personalized advice tailored to your situation.

Frequently Asked Questions

1. Can pausing my repayments negatively affect my credit score?
   Generally, a repayment pause agreed upon with your lender should not negatively impact your credit score. However, it's important to ensure that the pause is officially documented.
2. What happens if I can't resume payments after the pause?
   If you anticipate difficulties resuming payments, contact your lender immediately to discuss further options, such as refinancing or loan restructuring.
3. Are there fees associated with pausing repayments?
   Some lenders might charge fees for arranging a repayment pause, so it's crucial to check with your lender about any potential costs.
4. Can I make partial payments during a repayment pause?
   This depends on your lender's policy. Some may allow partial payments to reduce interest accrual, while others may not.
5. Is a repayment pause the same as loan forbearance?
   No, while both involve temporary relief, forbearance often includes halting both payments and interest accumulation, whereas a repayment pause usually allows interest to continue accruing.
6. How does a repayment pause affect my loan term?
   Your loan term may be extended to accommodate the pause, or your repayments may increase once the pause ends to cover the accrued interest.