Default isn't the same as the lender taking your house. The legal mechanic is a sequence. Default, the contractual breach, triggers a notice. The notice gives the borrower a period to remedy (typically 30 days under AU state-based legislation, longer for some matters). Only after the remedy period lapses does the lender's power of sale activate. The point at which a borrower could lose the security is weeks or months after the first missed payment, not immediately.
What triggers default
Most commonly: missed interest payment on a serviced file (where interest is paid monthly), failure to repay at term (the most common scenario for short-dated bridging files), or breach of a financial covenant in the loan documents. Less commonly: failure to maintain insurance, unauthorised security alteration, or insolvency events.
Notice of default
Once the default is recorded, the lender issues a formal notice. The notice specifies the default, the remedy required, and the period. For monetary default on a registered first mortgage in NSW, the notice is issued under s57(2)(b) of the Real Property Act 1900; equivalent provisions apply in other states. The borrower has the notice period to remedy.
What remedy usually means
In practice, three pathways.
Cure the breach. Pay the missed amount, or settle the loan if it's at term. Most defaults are cured.
Extension. The lender agrees to extend the loan term where the underlying exit is still in train (sale slower than expected, refinance taking longer). Extensions are negotiated commercially; they're not automatic but they're common.
Refinance. The borrower refinances the loan to another lender, settling the Archer facility in full. The lender will work with a documented refinance offer rather than rushing to sale.
Power of sale, last resort
If the borrower doesn't remedy in the notice period and no commercial pathway is available, the lender's power of sale under the mortgage activates. The lender appoints a real estate agent (the borrower can recommend one), markets the property, and sells. Sale proceeds clear the debt and selling costs; surplus goes to the borrower. The lender has a duty to obtain the best price reasonably obtainable, not fire-sale at any price.
Why most files don't reach sale
Two reasons. First, Archer's underwriting at entry sizes loans to a documented exit with contingency built in, files priced into forced sale rarely happen because the exit is real. Second, when an exit does slip, working commercially through an extension or refinance is faster and cheaper for both sides than going to sale. The credit team's posture is: if the underlying value supports it, we work through.
The borrower's protections
Three layers. The notice period (30+ days) gives time to remedy. Australian Consumer Law and the AFSL conduct framework apply to lender behaviour through the process. AFCA (the external dispute resolution scheme) is available if the borrower believes the lender has breached its obligations.
Frequently asked
How long after I miss a payment can the lender take action?After issuing a notice and giving the remedy period (typically 30 days for monetary default). Not the day after a missed payment.
Can the lender add fees and charges to the loan during default?Yes, where provided in the loan documents (default interest, legal costs). The lender can't add charges arbitrarily, they have to be contractually provided for and reasonable.
What if I dispute the default? Engage early. The fastest path through is communication. Where there's a genuine dispute, AFCA is the external resolution route.
Will the lender accept a partial cure? Often, where it's part of a clear path to full cure or refinance. Discuss with the credit team before missing further payments.
Does default affect my credit file? It can, defaults are recordable. Cured defaults are typically not, but each case depends on the circumstances and the credit bureau's policy.