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Actually, according to an interesting article I read a couple of weeks ago (unfortunately can't find it ATM), Australian home owners are worse off than they would be in the US if they get to the point of foreclosure. The article pointed out that in the US, if the lender forecloses, that's the end of the debt. You lose your house, but you don't have a massive debt hanging over your head and that's why so many people in the US simply walk away and force the bank to foreclose when their debt exceeds the value of the house.

If a lender forecloses in Australia, the house is sold and any balance still owing on the debt is still payable.

I wish I could find the source for the above and would be interested to hear if it is in fact true. It would certainly explain why there have been so many people in the US simply walking away and why the number of foreclosures has been so great over there.

To attempt to answer your question, most mortgages in Australia are insured so that they're paid, at least for a time, in the event of unemployment or illness. Our lenders have also been far more responsible about who they lend to and our mortgage documents are by law written in plain English with repayment schedules and the basis of calculating interest rates set out clearly.

a loan is a loan is a loan

some loans are secured

some are secured real estate

if you dont pay they take against the secuirty

if there is a balance left over you have to pay

you can go bankrupt the debt is totaly wiped

It's true, Ozmaniac. You are still liable on the personal covenants. Ironically it will protect us, a bit, from the fallout of the insane US lending practices.