Owning your own home not only provides you with a place to live, but plays a vital role in providing financial security and stability, such as through capital appreciation or tax benefits. The easiest way to buy your home is usually with a home loan, but qualifying for home loans for single parents on Centrelink may be challenging.
Eligibility to qualify for a home loan
Paying the bills and raising your children on a single income may be a financial stretch. Adding to the stress is finding a home loan that suits your requirements. Each lender may have specific eligibility criteria, but most typical home loans require you to:
- be over 18 years old
- hold an Australian citizenship
- earn a regular income, preferably from stable employment
- have a good credit history with no defaults or delays in payments
What income is accepted by lenders?
One of the most important eligibility criteria to qualify for a single-parent home loan is your disposable income. This is the balance left in your budget after deducting your expenses and other debt repayments, which will be used to make your home loan repayments.
Lenders may consider parenting-related payments like child support and maintenance while assessing home loans for single parents in Australia. But you must be able to show that these are regular and receivable over the long-term.
Some financial institutions also accept payments from Centrelink while assessing your eligibility for a home loan.
How do home loans for single parents on Centrelink work?
If you receive Centrelink benefits, your home loan application will be broadly the same as for other applicants. You'll have to save money for the deposit, then apply for a loan, and repay the borrowed amount plus interest in instalments over the loan term.
However, some lenders may have stricter eligibility criteria if you’re on Centrelink payments.
Which Centrelink benefits are accepted by lenders?
Lenders may accept Family Tax Benefits (FTB) Parts A and B as part of your income when you’re applying for a home loan. Some institutions may also accept the Large Family Supplement, which is an extension of the FTB.
The standard requirements for qualifying for home loans for single parents on Centrelink include:
- The age of your children, as fewer lenders accept these benefits if they are aged over 11 years.
- Submitting your entire Centrelink statement, including blank pages if any.
Lenders may not accept benefits like rent assistance, pharmaceutical allowance, or parenting payments because these are either for a specific purpose or may be discontinued when your circumstances change. For example, rent assistance ceases if you buy a home.
How to find a mortgage while receiving Centrelink payments?
To ensure you choose the right home loan for your situation, check the eligibility criteria before applying. It is always preferable to work with a lender that understands your circumstances. Some lenders may charge higher interest rates, so compare the options to find the best deal. Most importantly, a home loan is a considerable commitment and ensuring you’ll be in a strong financial position to make timely payments is crucial.
Most lenders will accept applications that include Centrelink payments if you also have a primary source of income. Additional paperwork may be required, and institutions may charge extra fees while considering the Centrelink payments as a secondary source of income. Lenders may not approve a loan of more than 80 per cent of the property value, so look into saving up some money to pay a deposit.
Make sure your application is strong, with all the required documents in place, which includes proof of identity, payslips, and bank statements.
Take the time to research the different options before you apply for a home loan while receiving Centrelink payments, as multiple rejections will negatively impact your credit.