What is a Centrelink home loan?
While Aussie lenders don’t offer specific 'Centrelink home loans', some mortgage providers might accept Centrelink payments as a form of income when assessing your application.
Can you get a home loan while on Centrelink?
You can apply for a home loan if you're receiving Centrelink payments, but approval may vary depending on the lender and your individual circumstances.
No lender is guaranteed to accept Centrelink benefits as income, and many only recognise certain payments. Some may also require you to have another source of income, such as employment or investment earnings, on top of your Centrelink payments, in order to qualify for a home loan.
When assessing your home loan application, a lender needs to understand whether you can comfortably afford the repayments over the life of the loan (even if interest rates rise). It’ll consider your overall financial position, including your income, expenses, and existing debts, and won’t approve your loan if it believes doing so could cause you financial hardship.
What do lenders consider when assessing applications from Centrelink recipients?
If you receive Centrelink payments, a lender may take a closer look at your application, considering extra things like:
- The type of Centrelink or government benefit you’re receiving: When a payment is considered somewhat permanent, a lender may be more willing to count it in your application. But if you’re receiving an often-temporary payment, like JobSeeker or Austudy, you might have less success getting a lender to count it as income in a home loan application.
- The income you earn in addition to Centrelink benefits: Many lenders offering home loans to people on certain Centrelink payments may only consider your Centrelink benefits as secondary or supplementary income, and might want to see proof of another source of income too.
- Whether you’re applying with a partner: If you’re applying for a home loan with a partner who also earns an income, this may improve your chances of being approved.
Most lenders will look at a range of factors beyond Centrelink payments when looking at your home loan application, including:
- Your overall income
- The size of the deposit you’ve saved
- The size of the home loan you’re seeking
- The value of the property you want to buy
- Any existing assets and debts you have
- Your average household expenses
- Your credit score
What Centrelink benefits can you use for a home loan?
The type of Centrelink benefit you receive may make a difference in your chances of being approved for a home loan.
Longer-term benefits, like the Age Pension, Family Tax Benefits, or Disability and Carers payments could be more likely to make the cut as a genuine source of income.
On the other hand, payments designed to be short-term, like JobSeeker, might be looked at less favourably.
Can Age Pension recipients get a home loan?
Receiving the Age Pension doesn't automatically stop you from getting a home loan. Lenders generally can't reject an application based on a borrower’s age alone, though your age may factor into how they assess the loan term and affordability.
Lenders need to assess a borrower’s ability to afford home loan repayments, both now and if rates were to rise. If the Age Pension doesn’t comfortably cover the repayments, you might be denied on that basis.
Also, a typical 30-year loan term likely won’t suit a person on the Age Pension. A lender will likely ask an older borrower to provide an ‘exit strategy’, detailing how they’d pay the mortgage off sooner than expected if needed.
What home loans can you get on Centrelink?
It can be difficult to work out what home loans a Centrelink recipient may be eligible for, as lenders’ rules differ when it comes to what is, and what is not, considered income.
It could be worth speaking with your current bank or a mortgage broker to learn if your income can be counted in a home loan application and, if so, what your borrowing power might be.
What assistance is available for low-income home buyers?
There are various government programs available for Australians who might need some help entering the housing market.
For example, eligible first home buyers and single parents could access the 5% Deposit Scheme. That might help them purchase a home with as little as a 5% deposit (or 2% for single parents), without paying for Lenders Mortgage Insurance (LMI).
The Help to Buy Scheme is a shared equity scheme that’s also offered around the country, letting eligible buyers to purchase a home with a government contribution of up to 40% of the asking price. The government will then own the relevant portion of a home until the homeowner buys it out or sells the property.
There are also several state and territory-based grants available for eligible first home buyers, as well as stamp duty concessions for certain home purchasers.
Do Centrelink home loans have higher interest rates?
Home loan interest rates offered to borrowers who receive Centrelink benefits aren’t necessarily higher than those offered to other borrowers. In fact, people with income partly made up of Centrelink benefits, such as the Age Pension and Family Tax Benefit, may be able to access the same rates as borrowers who aren’t on Centrelink.
However, this isn't guaranteed and may depend on the lender. If you receive certain Centrelink benefits and need to borrow through a specialist home loan lender, for example, that lender may charge higher interest rates as standard.
Borrowers with a smaller deposit may also need to pay for LMI, which can increase the overall cost of the home loan. LMI is generally needed when a person’s deposit is less than 20% of a property’s value, although some lenders may waive or discount it for eligible borrowers.
What do you need to apply for a home loan while on Centrelink?
If you’re applying for a home loan while on Centrelink benefits, your bank or lender will likely ask for proof of any payments you receive.
If child support payments form part of your income, you may also need to provide documents such as Family Court orders, a letter from your solicitor, or a letter from Services Australia showing the payments you receive.
Of course, you’ll need the same documentation as for any home loan application, like:
- Identification
- Proof of income
- Proof of savings
A lender will also want to know about any assets you own (such as a car), as well as any liabilities (like credit card debts, a car loan, and HECS-HELP balances), and your monthly household expenses.
Tips to boost your chances of mortgage approval if receiving Centrelink payments
1. Know your borrowing ceiling before you house hunt
Overestimating your borrowing power can lead to heartbreak during the property search. Running your numbers through a borrowing power calculator, getting home loan pre-approval, or reaching out to a mortgage broker before searching for a home can mean you’re less likely to see your application rejected. It can also help you avoid falling in love with a property that you ultimately can’t afford.
2. Choose a suitable lender
Take time to research lenders that are more likely to consider Centrelink benefits as income. Make sure you:
- Check the eligibility criteria: Some lenders may only accept certain types of Centrelink payments.
- Understand any other requirements: Many lenders only treat Centrelink income as secondary. With such lenders, you (or your co-borrower) may need to be employed or have another source of income to qualify.
- Avoid multiple loan applications: Submitting too many loan applications in a short period can affect your credit score. Each time you apply, it’s recorded on your credit report, and too many enquiries in a short span may signal financial stress to lenders.
3. Reach out to a mortgage broker if stuck
Navigating rules around Centrelink income and home loan eligibility can be complex. If you're unsure which lenders accept your benefit type or how much of it might be counted in your application, a mortgage broker could help.
They can assess your situation, show you lenders are more likely to be open to your financial situation, and guide you through the process.
