Preventing foreclosure or forced sale of home

What is foreclosure or forced sale

Foreclosure is the legal process by which a mortgagee takes possession of a property and sells it when the homeowner fails to make their mortgage repayments. The mortgagee repossesses the property to try to recoup money owing on the loan.

You may also be eligible to access some of your super if your property is subject to forced sale by:

• another entity, such as your local council
• an enforcement officer, by an order of a court.

Eligibility conditions for foreclosure or forced sale

If you're applying to prevent the foreclosure or forced sale of your home by a mortgage lender or council, you must meet the following 4 conditions:

• Condition 1 – the property subject to the foreclosure or forced sale is your principal place of residence (home).
• Condition 2 – you are legally responsible for the mortgage repayments or council rates on the property.
• Condition 3 – you have received written advice that your principal place of residence is to be foreclosed, sold, or repossessed. The advice was received from either
  • your mortgage lender, who has provided you with a default notice
  • your council, as your council rates have been outstanding for more than 2 years.
• Condition 4 – you have no capacity to pay an amount to prevent the foreclosure or forced sale.

If you've received a threat of foreclosure or forced sale of your home from an enforcement officer, you may still be eligible to apply. See Other forced sale of property for the evidence requirements.

Where the amount has already been paid by borrowing money, you still need to have met these criteria at the time the amount was outstanding. You also need to meet the additional eligibility criteria for the borrowed amount.

Maximum release amount for foreclosure from a mortgage lender

The maximum amount that can be accessed from your super in a 12-month period to prevent foreclosure from a mortgage lender is referred to as the cashing restriction. This is the sum of both:

• 3 months of repayments
• 12 months interest on the outstanding balance of the loan.

For example, if your monthly repayments are $1,200 and 12 months interest on your loan is $9,600, the maximum you can request within the 12-month period is

(3 × $1,200) + $9,600 = $13,200.

If you have more than one super fund, you can apply for several smaller amounts from each fund. However, the total amount released from all super funds can only be the amount required to stop foreclosure and is limited to the maximum release amount.

If your application to prevent foreclosure by your mortgage lender is approved, the cashing restriction 12-month period starts from the date your super fund releases the payment.

If you don't have enough funds to prevent the foreclosure, we will not approve the release of any funds.

Expenses that may be eligible

Expenses that may be eligible include:

• a payment on your home loan mortgage that is in arrears and your mortgage lender has provided you with a notice that your home will be repossessed or sold
• an amount to pay outstanding council rates on your home when the rates have been in arrears for 2 or more years and your council has given you written notice that they will sell your home
• a payment of an outstanding debt to a third party when a court order has been issued which gives an enforcement officer the authority to sell your home to wholly or partially pay the debt listed on the court order.

Expenses that are not eligible

If your expense is one of the following, do not apply for a release on compassionate grounds as you're not eligible, and your application will be rejected.

Expenses that are not eligible include:

• mortgage arrears where the property being sold is not your home
• mortgage arrears of another person, including the mortgage of a dependant
• mortgage arrears where your mortgage lender has not issued a default notice or equivalent notice
• council rates that have not been in arrears for more than 2 years or for which the council has not given you a notice they intend to sell the home
• costs in a Family Court splitting order or agreement that requires the home to be sold
• costs incurred to prevent you entering into bankruptcy, where being bankrupt will result in the loss of your home
• rental arrears
• other general living expenses.
• if the mortgage is held by a trustee for a trust

If you're not eligible and experiencing financial difficulties, you should consider whether you meet the eligibility criteria to access your super due to severe financial hardship.

Evidence for the expense

The evidence required in your application depends on the entity that is threatening the foreclosure or forced sale of your home.

Mortgage arrears

If you're applying to pay for overdue mortgage arrears to prevent foreclosure or forced sale of your home, you must provide all of the following:

• A default notice or equivalent notice issued from your mortgagee (bank or other lender) for each loan you secured against your home.
• A utility bill (such as for gas or electricity) that is less than 3 months old, in your name and shows the address of the property.
• A letter from your bank or lender for each loan secured against your home. The bank or lender letter must be addressed to you and state all the following
  • That payment of an amount is overdue, and the mortgagee will foreclose or force the sale of your home if the overdue amount isn’t paid by the due date.
  • The current amount owing that must be paid in order to stop action to sell your property.
  • The address of the property under threat of sale.
  • The amount equal to 3 months repayments for the loan.
  • The amount equal to 12 months interest on the outstanding balance of the loan.
  • The name of the person or persons legally responsible for the loan and the loan account number.

If you have more than one mortgage on your home, you need to provide a separate letter for each mortgage under threat by foreclosure or forced sale. The letter must be:

• dated no more than 30 days before the date on your application
• on the bank or lender's letterhead.

Mortgage arrears paid by borrowing money

Where the mortgage arrears have been paid by borrowing money separately to the mortgage, you need to provide all of the following:

• Documents from your lender showing the value of 3 months repayments and 12 months interest at the time the amount was owing. Documents that can be provided include mortgage statements for the period or a letter from your lender.
• A default notice or equivalent notice from your mortgagee that relates to the amount that was owing.
• A utility bill (such as for gas or electricity) that is less than 3 months old, in your name and shows the address of the property.

There are also additional documents required to support the borrowed amount.

Council rates

If you're applying to pay for arrears on council rates to prevent the forced sale of your home, you must provide both of the following:

• A utility bill (such as for gas or electricity) that is less than 3 months old, in your name and shows the address of the property.
• A letter from the council, addressed to you and stating all of the following
  • The address of the property under threat of sale.
  • That payment of an amount is overdue, and the council has begun action to foreclose or sell your home if the overdue amount isn’t paid by the due date.
  • The current amount owing that must be paid in order to stop action to sell your property.
  • The amount in arrears itemised for each year.
  • That you owe a minimum of 2 years or more of council rates.

The letter must be:

• dated no more than 30 days before the date on your application
• on the council's letterhead.

Council rates paid by borrowing money

Where the council rates have been paid by borrowing money, you need to provide a:

• letter from your council that relates to the amount that was owing
• utility bill (such as for gas or electricity) that is less than 3 months old, in your name and shows the address of the property.

There are also additional documents required to support the borrowed amount.

Other forced sale of property

If you're applying to prevent the forced sale of your home to satisfy an outstanding debt you owe another entity, you must provide all the following documents:

• A utility bill (such as for gas or electricity) that is less than 3 months old, in your name and shows the address of the property.
• A copy of the court order that
  • lists you as the debtor
  • authorises an enforcement officer to sell your home to satisfy (in full or in part) the amount owing to another entity (creditor) as listed on the judgment.
• A letter from the enforcement officer that states all the following
  • they will now proceed to sell your property in accordance with the court order
  • the address of the property they intend to sell
  • the current amount owing that must be paid to prevent the sale.

Where the outstanding debt has been paid by borrowing money, you must provide a:

• letter from the enforcement officer that relates to the amount that was owing
• utility bill (such as for gas or electricity) that is less than 3 months old, in your name and shows the address of the property.

There are also additional documents required to support the borrowed amount.