HELP! HOW CAN I HANDLE BOND ARREARS?

by Taryn Davies Stevens • 4 MIN • 768 Words

Falling into arrears on your home loan can feel overwhelming, but the most important step you can take is to act quickly and communicate openly with your bank. There are several strategies that can help you avoid legal action, preserve your credit score, and even retain some control over the situation.

Here’s a practical, step-by-step guide to managing bond arrears in a responsible and informed way.

STEP 1: ACT EARLY – COMMUNICATE WITH YOUR BANK
Early engagement demonstrates proactivity and good faith, which gives your bank more incentive to assist you.

How to do it:

Contact your bank’s home loan or recoveries department as soon as you anticipate difficulty in meeting repayments.
Be honest about your financial situation.
Request to speak with a consultant about available relief options—commonly referred to as a hardship arrangement.

WHAT IS A HARDSHIP ARRANGEMENT?
A hardship arrangement allows the bank to temporarily adjust the terms of your loan to help you cope financially—without being classified as in default. These arrangements can include:

Lower monthly repayments
Payment holidays (full or partial)
Extension of the loan term (e.g., from 20 to 30 years)
Temporary interest rate reduction
Interest-only repayment options

STEP 2: REQUEST A LOAN TERM EXTENSION (20–30 YEARS)
Extending your repayment period can lower your monthly instalment, giving you some breathing room.

How to do it:

Ask your bank to restructure your loan over a longer term.
This may take the form of a re-amortised loan or an assisted sales programme aimed at keeping your account in good standing.
Be prepared to submit:
- Recent bank statements
- Proof of income
- A motivational letter
- A revised household budget

STEP 3: REQUEST A BALANCE OR PRICING CONCESSION
If your property sale proceeds won’t cover the outstanding loan, the bank may possibly be willing to write off a portion of the balance.

How to do it:

Request a shortfall settlement discount—especially if you're actively selling the property.
Highlight that this avoids legal costs and auction-related expenses for the bank.
This is could be considered in distressed sales and pre-auction situations.

STEP 4: NEGOTIATE AN INTEREST RATE CONCESSION
A lower interest rate directly reduces your monthly repayment obligation.

How to do it:

Request an internal rate review from your bank.
This is more likely to succeed if you:
- Have a strong repayment history
- Show a commitment to maintaining the loan account

STEP 5: ASK FOR TEMPORARY REPAYMENT RELIEF
If you’re between jobs or waiting for a property sale, a short-term payment break can provide critical relief.

Options may include:

Switching to interest-only payments for up to 6 months
Making reduced payments (e.g., 50% of the instalment)
Requesting a full payment holiday (less common, but possible)

Tip: Relief options are more likely if the property is already on the market or you’re actively trying to resolve the situation.

STEP 6: SELL AT MARKET VALUE WITH AN ACKNOWLEDGMENT OF DEBT (AOD)
Selling before repossession helps protect your credit profile and prevents a forced sale.

How to do it:

Agree with the bank to sell your property at fair market value—even if it’s less than the outstanding bond.
The bank may convert the shortfall into an Acknowledgment of Debt (AOD).
Benefits of this option:
- Avoids additional legal fees
- Halts further interest accumulation
- Sidesteps the stigma and low returns of sheriff’s auctions
- AOD terms can be interest-free and structured for affordability

STEP 7: UNDERSTAND VOLUNTARY SURRENDER (LAST RESORT)
While it still affects your credit record, voluntary surrender is a more cooperative alternative to repossession.

How to do it:

You formally hand over the property to the bank.
The bank then proceeds with sale—often via private treaty or auction.
You remain liable for any shortfall, unless a concession is negotiated.

STEP 8: GET PROFESSIONAL HELP
Expert support can improve your chances of negotiating better terms and avoiding legal pitfalls.

Who can help:

Property consultants such as INTRO REAL ESTATE, experienced in distressed sales
Conveyancing attorneys
Bond originators

They can assist with:

Drafting proposals and budgets
Communicating with the bank
Structuring settlements and AODs

Additional Tips For Navigating Bond Arrears:

Keep all correspondence in writing for transparency and record-keeping.
Maintain honesty and clarity with your bank—it builds trust.
Don’t delay. Address the issue before it escalates.
Consult with a debt counsellor or financial advisor if you’re overwhelmed.
Selling early—before default—protects your future borrowing ability and avoids credit bureau listings.

Arrears can happen to anyone. What matters most is how quickly you respond. With the right communication, support, and strategy, you can regain control and minimise the financial and emotional toll of a distressed bond.

For more information, contact INTRO REAL ESTATE, it’s the right choice.

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