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What is a veteran?

A veteran is someone who has served in the Australian Defence Force (ADF), often serving the country overseas. The government usually pays an allowance to assist with the well-being of service members who are no longer actively serving in the military. Such payments are made periodically and can be shown as part of your income when you’re applying for a home loan.

The defence pension, or a veteran’s pension, is one such type of regular financial support offered by the government to service members who once served in the armed forces. When the individual who served passes away, the money is paid to their beneficiaries, such as a war veteran widow or their children. 

Some veterans also receive a disability pension, to support and compensate for any injury or long-term diseases that were caused or aggravated by their service with the ADF.

What you need to know about home loans for veterans

Currently serving members of the ADF and other younger veterans may be eligible for assistance when taking out a mortgage to buy a home or an investment property. 

According to the Department of Veterans’ Affairs (DVA), eligible veterans, ADF personnel and their dependants may be able to access three types of DVA home loan subsidy schemes, depending on their qualifying period of service.

  • Defence Home Ownership Assistance Scheme (DHOAS): Available to current and former ADF members who served on or after 1 July 2008, and completed a qualifying period of service and accrued sufficient entitlement and have served in the ADF within the last five years.
  • Defence Service Homes Scheme (DHS): Available to former ADF members who completed a qualifying period of service before 15 May 1985 or served in Namibia between 18 February 1989 and 10 April 1990.
  • Defence Home Ownership Scheme (DHOS): available to former ADF members who enlisted on or after 15 May 1985, and separated from the ADF before 1 July 2008.

Veterans can also apply for the everyday home loans found in Australia’s mortgage market, provided they can fulfil the necessary eligibility requirements, whether they receive support from the DVA or not. 

Generally, to qualify for a home loan, a borrower will need to demonstrate to the lender that:

  1. You’ll be able to meet your loan repayments on time.
  2. Your income will continue until the end of the loan term.

Older veterans are often entitled to a government pension that is considered a part of their income during the home loan application process. However, veterans that are solely dependent on a government pension are more likely to fall into the category of non-standard borrowers. Lenders are extra cautious while evaluating such borrowers for a home loan. 

Tips for improving your credit score

It may also help if you have a good credit score to support your home loan application. Your credit score is a number that represents your credit history (e.g. whether you have been paying your debts and utility bills on time) and helps lenders to assess your level of risk as a borrower. A higher credit score indicates financial discipline, which means lenders are more likely to trust you to repay a loan or debt in the future, improving your chances of mortgage approval. 

You can check your credit score online by providing a few personal details. It’s often a good idea to order a free copy of your credit report every year to understand your credit score better and get ahead of any potential issues. When you’re applying for a home loan, it may help to review your credit report in advance. This allows you to look for any discrepancies that may adversely affect your credit score and start working to fix them.

Paying all your bills on time is an excellent way to keep your credit score in check. You can also use the following tips to help improve your credit score and credibility in the eyes of lenders and other credit providers:

  • Paying all your bills on time
  • Reduce your credit card limit if possible
  • Close extra credit cards, unless you have a strong reason to keep more than one credit card
  • Try to pay your entire credit card bill each month
  • Don’t delay or default on your loan repayments
  • Pay utility bills on time. You can select an auto-debit option to ensure timely payments
  • Minimise credit applications. You can always check your eligibility for a home loan with specific lenders or speak with a mortgage broker before filing out your home loan application to minimise the number of enquiries on your credit file

Getting a home loan on a veteran’s pension

Veterans may opt for a standard home loan or apply with a specialist lender that offers unique solutions for veterans. Three lenders that provide home loans as part of the DHOAS are Defence Bank, Australian Military Bank, and NAB. DSH loans are available through Westpac. 

If you have other sources of income apart from your veteran’s pension or are only borrowing a small percentage of the property value, you may be able to apply for a standard home loan and access a greater variety of home loan options. 

If you’re applying with your veteran’s pension as your only source of income, or are borrowing at an advanced age, you may need to look at a lender that specialises in veteran home loans or non-standard home loans.

Pensioners applying for a home loan may be able to make their application stronger with a sizeable deposit (preferably 20 per cent of the property price) and a clean credit history. 

If you can't decide the next course of action, you can discuss your unique circumstances with a mortgage broker that has access to a wide range of lenders. A broker will provide you with expert financial advice regarding your home loan and help you look for lenders that suit your personal circumstances. 

Contact a mortgage broker

Who is eligible for a veterans home loan?

Veterans home loans are specifically tailored for veterans who have served in the ADF and receive a regular pension from the DVA. Some lenders also offer home loans for veterans’ families to individuals receiving a war widow’s or widower’s pension. 

Some specialist lenders also provide disabled veteran home loans. These loans are for veterans who suffered a disability during their time serving as a member of the ADF and receive the Incapacity Pension from the DVA.

Eligibility for the various veteran home loan programs from the DVA will be based upon your period of service and other factors, all covered on the DVA website

For veterans applying for other home loans, banks may accept the following types of veteran’s pension as income for home loan application purposes:

  • Service pension
  • War widow’s or widower’s pension
  • Veteran’s affairs age pension
  • Other permanent and ongoing pension income on a case-to-case basis

What documents do veteran pensioners need to apply for a home loan?

Veteran pensioners may need to provide some additional documents on top of the standard documentation required for a home loan application. Different lenders may have specific requirements in this regard, but you’d generally need to provide them with the following documents:

  • Proof of genuine savings amounting to at least 5 per cent of the property value to cover the minimum deposit
  • Bank statements showing your pension payments or a current Department of Veterans’ Affairs statement
  • When applying for a home loan on a disability pension, you’ll need a letter from Centrelink confirming the nature and status of your disability pension.

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

How do you compare home loans?

To compare home loans, you can assess the components of the loan against your own financial situation and other mortgages in the market.

Look at the interest rate, rate type (fixed or variable), loan fees, features, loan term, repayment frequency and more to find a home loan that fits with your budget and property goals.

Then, use comparison tools like comparison tables, calculators, or RateCity's Real Time RatingsTM to create a short list of home loan options, and decide which home loan best suits your needs.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

Can I get a NAB home loan on casual employment?

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

How to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances. 

To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.

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