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Can a student get a home loan?

Can a student get a home loan?

It is possible for students in Australia to get home loans, provided they can fulfil a mortgage lender’s eligibility requirements. This may not be easy for many students, who already have significant study commitments.

Firstly, to get a home loan in Australia, you need to be aged over 18. This puts most students of high school age and younger out of the running.

Students at TAFE or university may be able to apply for a home loan, but they’ll need to establish that they can not only pay a deposit on a property, but comfortably afford the repayments on a home loan before a bank or mortgage lender is likely to approve their application.

If you’re an international student studying in Australia, you may face additional challenges when it comes to getting a home loan. Most mortgage lenders prefer that borrowers have Australian citizenship or permanent residency rather than a student visa, though a few may make exceptions.

What do students need to get a home loan?

Like most other Australians, there are two main things that students need to successfully apply for a home loan:

  • Savings – To cover the cost of a deposit on a property, plus other upfront fees, charges and expenses
  • Income – To cover the cost of mortgage repayments

Saving a deposit as a student may challenging, as rent and study expenses may eat up a lot of your income. Students living at home with their parents or other family may be able to save some more money, but this option may not be available to all students.

Keep in mind that many lenders will want proof that your home loan deposit is made up of genuine savings – that is, income earned from your job and saved in the bank. Gifts or inheritances from family may not be accepted, unless you can show that you’ve kept this money saved for some time without dipping into it for spending, thus demonstrating financial discipline.

Income can also be a stumbling block for students wanting to buy a home. A strong and steady income often requires full time employment, which may not be possible if you’re already a full-time student. Plus, some higher-paying jobs require a certain level of education or qualifications, which requires study.

Most lenders prefer that mortgage applicants can provide evidence of steady income history, which may not be available from part-time or casual work undertaken between studying. Not all lenders will accept income from scholarships or similar student grants either, as they may not consider these to be reliable sources of ongoing income. Also, few lenders will accept Centrelink benefits as income for a mortgage application.

Keep in mind that if you have an outstanding HECS/HELP debt, you may take home slightly less income until the debt is paid off. Additionally, you’ll need to tell a lender how much you owe on your HECS/HELP debt when you apply for a mortgage, along with how much other debts such as personal loans, car loans and credit cards. The more outstanding debt you owe, the less confident a lender may feel about letting you borrow more money for a home loan.

Where can a student get help with a home loan?

Most mortgage lenders offer their best home loans to the applicants that can best fulfil the eligibility criteria and other terms and conditions. Applying for a home loan as a student could mean being charged a higher interest rate and/or fees, having to pay a higher deposit, or having to fulfil other terms and conditions.   

There are a variety of government grants and incentives that may be able to support students buying property. This can range from the First Home Owner Grant (FHOG) to the First home Loan Deposit Scheme (FHLDS) and more. These may be able to help make up part or even all of your home loan deposit, and potentially help you to sidestep the cost of Lenders Mortgage Insurance (LMI).

A guarantor may be able to help you apply for your first home loan as a student. This is where your parents or another close relative agrees to guarantee your mortgage using the value of their own property. This may allow you to apply for a home loan without a large deposit or having to pay LMI charges, though your guarantor will become responsible for your mortgage should you default on your repayments.

A mortgage broker may be able to provide personal advice on what types of home loans and mortgage lenders may allow a student to buy a home or investment property. Going to a mortgage broker is typically free, and they can assist you with every step of your home ownership journey.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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