Buying a home loan as an Indigenous Australian
Owning and living in your own home has been the dream of many Australians for some time now, but the realities of getting a loan mean that home ownership is not sustainable for everyone. Historically, this has been particularly true for Indigenous Australians.
Although data from the Australian Institute of Health and Welfare (AIHW) shows rates of home ownership have been steadily increasing for Aboriginal and Torres Strait Islander residents over the past decade, the stats still show a struggle to get into the property market.
According to the AIHW statistics, only 36% of Indigenous people own their own home (2014).
Indigenous Australians are 6 times more likely to live in social housing, and 1 in 4 Indigenous households receive Commonwealth assistance.
Aboriginal home loans available in Australia
Although there are no restrictions on Aboriginal home loans, the Australian government and Indigenous Business Australia (IBA) have a range of schemes and support programs to provide Aboriginal home loans. These Indigenous home loans make home ownership more accessible to Aboriginal Australians and Torres Strait Islanders.
Read on to find out how the IBA’s Aboriginal home loans, also called Indigenous home loans, work.
How Indigenous home loans work
The Indigenous Home Ownership Program run by Indigenous Business Australia (IBA) has been providing Indigenous home loans to Aboriginal and Torres Strait Islanders for over 40 years, helping people overcome barriers to home ownership.
The IBA offers home loan products to enable eligible Indigenous Australian customers to buy an established residential property or to construct a new home. Indigenous home loans do not allow you to buy an investment property, or any home that you do not intend to live in.
The amount that the IBA lends will depend on a number of factors, mainly:
- Your employment income and any other income you earn
- Rental history
- Current living expenses
- Current credit card debts and your credit history
- Your savings history
- Your eligibility for the First Home Owners Grant
The IBA will assess each of these factors in your application.
It is important to know that an Indigenous home loan provided by the IBA won’t cover all of the funds needed to purchase a home. Based on your circumstances, the IBA will provide with a portion of the required funds in a loan.
You will need to borrow the remaining funds from another lender. To do so, you’ll need to lodge another application with your chosen lender, with the assistance of the IBA. The maximum loan amounts you can expect to receive can be seen below:
|Maximum loan amounts available from IBA|
|Total gross income||Maximum IBA loan amount||Other lender loan amount|
|Up to $116,742/year||100%||0%|
|$116,743/year – $137,589/year||40%||60%|
|$137,590/year – $187,621/year||20%||80%|
Source: Indigenous Business Australia
To see what lenders you can potentially choose from, use the Canstar website to compare home loans based on how they might suit your needs. Remember to consider the loan type, interest rate, fees, repayments, and other features you may need when choosing a home loan product. For more information, read the Canstar Choosing A Home Loan Checklist.
Lowest advertised rates for variable home loans
The tables below display a snapshot of the lowest variable home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).
Top interest rates for refinance home loans
Top home loan interest rates for first home buyers
Top interest rates for investment home loans
Remote Indigenous Home Loans (RIHL)
Another more recent initiative by the IBA is the introduction of Remote Indigenous Home Loans (RIHL), which aim to improve home ownership rates for Indigenous people living in remote areas.
This scheme provides Indigenous home loans to Aboriginal or Torres Strait Islander peoples who live in remote areas and can demonstrate they are ready to take on the responsibilities that come with owning a home.
The locations that are included are those the Australian Government’s Remote Indigenous Housing Strategy, of which you can see a complete list here.
In terms of financial assistance, Remote Indigenous Home Loans may include:
- Up to $20,000 in grants for minor house renovations and repairs
- Up to $13,000 grant available to meet establishment costs, like legal or financial advice as well as home insurance
- An IBA standard introductory interest rate loan, which has a longer introductory period and lower interest escalation rates
- Low deposit requirements as little as $1,500 (based on income)
Features of Indigenous home loans
The Indigenous home loans provided by the IBA differ from person to person based on individual circumstances, but you can generally expect them to come with the following:
- Lower introductory interest rates: The interest rate will gradually increase over time to help you adjust to your repayments, and a lower interest rate initially means less interest that has to be repaid each month.
- Low deposit requirements: You’ll still need to save up a bit to make the initial deposit, but loans like the Remote Indigenous Home Loans can require deposits as small as $1,500, depending on your income.
- Financial assistance: The IBA provides financial help to those who need it, especially for those looking to build or buy a home on communal land.
- Standard loan terms: Indigenous home loans can have any of the standard terms – a 25-year to 30-year long term for a standard variable loan, and a loan term of 1 to 5 years for fixed rate loans (or the more uncommon long-term fixed rate terms of 10 to 15 years).
Indigenous home loans and Aboriginal home loans are basic home loans, so those are the main features you can expect them to come with.
How to apply for Aboriginal home loans
To apply for Aboriginal home loans or Indigenous home loans, you need to meet the eligibility requirements set out by the Australian Government and the RBA:
- You must be over 18 years old
- You must be of Aboriginal or Torres Strait Islander descent
- You must meet the minimum deposit requirements
- You must show you can afford to pay the loan repayments
The criteria on Indigenous home loans generally aren’t as strict as a standard home loan, but having a good history of making repayments and a strong control of your finances will definitely help. Read our article on how to improve your credit rating here.
If you meet the requirements above, then you can move ahead with your application by filling in the 3 forms required by the IBA:
In addition to filling out these forms, you’ll also need to show the lender documentation including proof of your income (e.g. payslips), assets (things you own), liabilities (debts such as credit cards or personal loans), and evidence of your ability to make the repayments.
When all of this is done, you may be invited to apply for an IBA housing loan. An IBA Home Lending Officer can take you through the remainder of the process, and you’re still free to consult a financial advisor if you want more financial advice.