Understanding Financial Hardship

What Is Financial Hardship?

Are you struggling to pay regular bills or make loan repayments? Relying on savings to cover everyday costs? Taking out loans or using credit cards to manage regular expenses? Increasing debt levels without a clear plan for repayment? If you answered yes to any of these questions, you might be experiencing financial hardship.

Financial hardship occurs when you can’t pay your essential bills and expenses or make your mortgage repayments. This often happens due to a drop in income or unexpected costs, such as increases in interest rates. This often leads to stress, health issues and difficulty managing debt and housing.

In the three months leading up to February 2024, a staggering 1.6 million mortgage holders in Australia were ‘at risk’ of mortgage stress, a Roy Morgan report revealed.

If you find yourself in such a situation, it’s important to know that help is available. Understanding who is eligible for financial hardship assistance is the first step toward finding relief and regaining control over your finances.

Who Is Eligible For Financial Hardship Assistance?

Financial hardship assistance is available to mortgage holders facing difficulties due to circumstances beyond their control. Key eligibility criteria include:

• A significant drop in income: Job loss, reduced working hours or business failure.
• Unexpected expenses: Medical emergencies, family changes or natural disasters.
• Rising living costs: Inability to meet essential expenses due to increased cost of living.

If you meet these criteria, you may qualify for hardship variations. Approach your mortgage broker for help in securing your lender’s hardship assistance, and explore various government programs available to manage repayments effectively.

How To Prove Financial Hardship

If you are experiencing mortgage stress and need financial hardship assistance from your lender, you will generally need to provide evidence demonstrating your current inability to meet repayments or basic living expenses. Here are the key steps and types of evidence banks typically require:

Step 1: Contact your lender’s hardship team as soon as possible

• Banks have dedicated teams to assist customers facing financial difficulties.

• Explain your situation and request a hardship variation or assistance.

Step 2: Gather documentation to prove your hardship

• Centrelink statements, payslips and bank statements showing reduced income.
• Evidence of serious illness, disability, or unemployment preventing you from earning an income.
• Proof of major disasters that have destroyed or severely damaged your home.
• Documentation related to family/domestic violence affecting your financial situation.
• Evidence of the death of a partner or child, including death certificates, funeral notices, and medical/funeral expenses.

Step 3: Complete a statement of financial position

• Provide details of your current financial situation and repayment plan.
• This helps the bank understand your ability to repay the debt under a hardship arrangement.

Step 4: Provide any additional information the bank requests

• Banks may ask for further evidence, like doctor’s certificates, termination notices, or money plans.
• A free financial counsellor can assist in preparing the required documentation.

Step 5: Negotiate a hardship arrangement with the bank

• If approved, get the details in writing, including repayment amounts, fees and start/end dates.
• Make sure you can meet the agreed-upon arrangement; contact the bank if you need to modify it.

Navigating Financial Hardship

Financial hardship can be stressful, but there are options to get back on track. You can explore assistance programs from the government (Centrelink) or hardship programs your bank offers. The best approach often involves getting help from both sides.

Financial Help from The Government

Centrelink: Centrelink offers a range of financial assistance programs for those facing hardship. Key programs include:

• Income Support Payments: Such as JobSeeker Payments, Parenting Payments, and Disability Support Pensions for those unemployed, ill or caring for someone.
• Rent Assistance: Additional financial support to help cover rent for eligible individuals and families.

Visit Centrelink’s website for more details on eligibility and how to apply, or call the National Debt Helpline at 1800 007 007 to talk to a financial counsellor.

Emergency Relief: Non-profit organisations, often funded by the government, provide immediate financial crisis support. This can include food vouchers, and assistance with utility bills, and essential household items.

Early Release of Superannuation: In specific situations, like severe financial hardship or compassionate grounds, you might be able to access your superannuation early. Examples of qualifying situations include:

• Severe financial hardship: If you have been receiving eligible government income support payments for a continuous period of 26 weeks and are unable to meet reasonable and immediate family living expenses.
• Compassionate grounds: Such as needing to pay for medical treatment for yourself or a dependent, preventing foreclosure on your home, or covering funeral expenses for a dependent.

State and Territory-Based Assistance Programs: Each state and territory offers specific programs, such as rent relief grants, utility relief grants, and various concessions and rebates. Here are some examples:

• NSW: Rent Choice Assist, Energy Accounts Payment Assistance (EAPA), Water Payment Assistance Scheme (PAS).
• Victoria: Rent Relief Grant, Utility Relief Grant Scheme, concessions and benefits.
• Queensland: Rental Grant, Home Energy Emergency Assistance Scheme, Electricity Rebate.
• Western Australia: Rental Assistance, Hardship Utility Grant Scheme (HUGS), Energy Assistance Payment.
• South Australia: Emergency Financial Assistance, ConcessionsSA, Private Rental Assistance Program.
• Tasmania: Housing Connect, Energy Bill Relied Fund, Cost of Living Concessions.
• ACT: Rental Bond Help, Electricity, Gas and Water Rebate, Energy Support Voucher.
• NT: Rental Assistance, Electricity Concession, Emergency Relief through community organisations.

Financial Help from Banks

Many Australian banks offer hardship programs to support customers in financial difficulty. These programs can include loan modifications, repayment pauses, and debt consolidation. Contact your bank’s hardship team to discuss your specific situation and explore available options.

Can A Mortgage Broker Help With Financial Hardship?

Yes, mortgage brokers can help you. Home Loan Experts can be your valuable ally. Here’s how we can assist you through these challenges.

Explaining Your Situation To The Lender

One of the first steps in managing financial hardship is communicating with your lender. We can assist you by:

• Preparing Your Case: Helping you gather the necessary documents and information to present your financial situation clearly.
• Lender Communication: Guiding you on how to explain your hardship to your lender, ensuring they understand your circumstances fully.
• Negotiation Support: Using our expertise to negotiate with the lender on your behalf, aiming for the best possible outcome.

Choosing Financial Hardship Options

Once your lender understands your situation, there are several hardship options that may be available. We can help you explain and explore the optimum one for your needs, such as:

• Repayment Pause: Temporarily pausing your home loan repayments to provide immediate relief.
• Loan Modifications: Adjusting the terms of your loan, such as reducing monthly repayments or extending the loan term.
• Interest-Only Payments: Switching to interest-only payments for a period to lower your monthly obligations.
• Debt Consolidation: Combining multiple debts into a single, more manageable loan.

Making Your Financial Hardship Arrangement

After selecting the best option, we assist you in making the necessary arrangements, ensuring everything is set up correctly:

• Documentation: Helping you complete and submit any required paperwork accurately and promptly.
• Follow-Up: Ensuring the lender processes your hardship arrangement and confirming that it is reflected in your loan terms.
• Ongoing Support: Providing continuous monitoring and support to ensure your financial arrangement remains effective and adjusting if your situation changes.

Discover how we helped our clients Ben and Kate manage their mortgage and overcome financial distress, saving thousands each month. Read their inspiring story to see how expert guidance turned their financial challenges into stability.

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