Getting Centrelink benefits doesn’t mean that you have to give up your dream of owning a home. Your home loan application will be the same as anyone else’s – you save up a deposit and borrow money. However, if you are looking for a lender who will consider your Centrelink payments as a source of income, the options are much fewer. While some lenders do consider a few Centrelink payments as part of your income, they have a much stricter application process.
If your only source of income is the Centrelink payment, your application is unlikely to be approved. Your chances improve if someone in your house is employed and you can show that as proof of stable income. A few lenders will accept Centrelink payments as the sole source of income from single parents or those on a war veteran pension, but the interest rates they charge may be higher. The policy differs from lender to lender, and you’ll need to do your research or reach out to a mortgage broker to know which lender can help you.
Can I get a home loan on these Centrelink payments?
Even if you receive payments from Centrelink, home loans can still be easy to come by. Many lenders will accept Centrelink payments as a source of income at the time of considering your home loan application, especially if you receive any of these benefits:
- Family tax benefit: If you receive parenting payments from Centrelink, you may qualify for a home loan. It does, however, depend primarily on the lender and your current financial situation. Some lenders are willing to accept Family Tax Benefits (FTB) Part A and B as income, provided you can present supporting documentation. Certain FTB payments aren’t considered income since they have specific purposes, such as medical allowances, parenting payments and rental assistance.
- Child support/maintenance: Some lenders accept child support income and child maintenance when assessing your income. At the time of loan application, you will need to inform whether the payments are through the Child Support Agency (CSA), whether they are court-ordered and if you’ve received regular payments over the last six months. You might also be required to present documentation such as your bank statements, a letter from CSA, a copy of the Family Law Court Order and a letter from your solicitor.
- Carer’s allowance: Do you provide extra care to someone disabled, severely ill or aged? In that case, you might be able to include the income in your home loan application. Your lender might ask for documents to back your claims.
- War veteran’s and widow’s pensions: This payment might be accepted since it’s on-going payment and is typically considered normal income.
- Disability pension: A disability pension is considered to be a valid form of income by most lenders. However, the actual value of the income amount will determine whether you will be able to repay the loan comfortably. Lenders will also require you to provide supporting documentation, including bank statements and a letter from Centrelink verifying your disability pension.
How can someone on Centrelink get a home loan easily?
Getting a mortgage while receiving Centrelink payments might be a bit difficult, but it isn’t entirely impossible. Here are a few tips to keep in mind while looking for a mortgage:
- Make a strong application. If required, take the help of a broker to guide you.
- Collect all necessary documents, including bank statements, payslips and identity documents.
- Do not over-apply. Research thoroughly before you even begin the process of application if you plan on including Centrelink payments as income. A large number of rejected applications will damage your credit score.
- Be doubly sure that you can make your loan repayments comfortably.
How do you find the right lender?
Getting a home loan on Centrelink is easier with the right lender. Compare the lending criteria, the rates and the terms on offer before you shortlist a home loan. Here are a few tips to keep in mind while selecting a lender:
- Eligibility criteria: Certain lenders are willing to consider home loan applications only if you’re receiving Family Tax Benefits.
- Lender: Look for someone more sympathetic to your circumstances.
Once you have chosen the lender, do check that the terms are not unfavourable due to any of the following reasons.
- Higher interest rates: Due to your unique circumstances, lenders may be willing to offer you a home loan but at a higher rate. Shop around and compare rates to make sure you get the deal best suited to your circumstances.
- Extra fees: There might be extra fees for the paperwork involved in including the Centrelink payment as a second source of income.
- Higher LVR: There may be certain restrictions on how much the lender permits you to borrow (known as a loan-to-value ratio), and you might not be able to borrow beyond 80% of the property's value.
Talking to a mortgage broker at the time of making your home loan application could make it easier for you to navigate through the process.