Centrelink recipients still have a wide range of choices when taking the step toward owning their own home.
Obtaining a home loan through a traditional bank is challenging for those receiving Centrelink benefits. If you do your research, however, you will find that receiving Centrelink benefits doesn’t necessarily mean you have to give up the dream of owning your own home.
You'll need to do some research or contact a mortgage broker to find out which lenders accept Centrelink benefits as your sole source of income.
It’s important to note that some payments are considered more permanent than others by lenders, and can help you build a case for your home loan application.
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How does a mortgage for people on Centrelink work?
A home loan that is designed for a Centrelink recipient works in the same basic way as a home loan offered to other Australians, in that money is borrowed and paid back with interest. One of the major differences is that the application process may be more difficult, because you’re trying to find a lender who understands your situation. These lenders will allow certain Centrelink benefits to be counted as income. Other types of information will be used by the lender to decide whether the applicant will be capable of making timely monthly repayments.
A Centrelink recipient will need to be specific about which benefits they are receiving and for how much. Centrelink recipients who already own a home can also use this type of loan to refinance their current home loan.
Jane is currently receiving Centrelink benefits and applies for a home loan
Jane is a divorced mother of two children, who in addition to income from her job receives Centrelink benefits in the form of Child Support. After saving for five years she felt confident that she had the money needed for a deposit and began to investigate home loan lenders who would be willing to consider her Centrelink benefits as a reliable source of income.
Jane calculated what she could borrow based on her income alone and found that she would only be able to look at homes that cost around $396,000. Once she added the additional $200 she received weekly through her Centrelink benefit that number jumped to over $415,000. Since her children were still young, she was able to find a bank that met her in the middle and allowed her to borrow $400,000 to purchase a new home.
What are the risks?
- Overapplying. Be sure that you do your research before you begin applying for a home loan if you are including Centrelink benefits as income. Too many rejected applications will further damage your credit history.
- Ensure you can make your loan repayments. While the idea of owning a home may be enticing, you should first make sure you're able to take on that type of financial commitment. It may be a good idea to try smaller personal loans at first to help build your credit and possibly qualify for a loan with lower rates later on.
Pros and cons of getting a home loan while receiving Centrelink benefits
- Accessibility. A home loan that has been structured for Centrelink recipients gives them an opportunity that many lenders are not willing to afford them.
- Harder to qualify for. Lenders will be strict about which types of Centrelink payments are considered income. For example, if you receive rent assistance, that cannot be considered as the funds are designated for a specific payment and are not disposable income. See below to find out which types of Centrelink benefits lenders will accept.
Is your Centrelink benefit accepted by lenders?
Not all Centrelink benefits will be considered by a lender as an acceptable form of extra income. Those that are designated for a specific purpose, such as for pharmaceuticals, will not be added to your monthly earnings. Others may be considered, but only under certain conditions. The information below is a general guide only. Please remember that each lender might treat the below benefits in different ways:
|Age pension||Yes||Age pension will only be considered as a secondary form of income. You must have another source of earnings in addition to the benefit.|
|Carer’s Allowance||Yes||This type of benefit will require that you have an additional source of income. Earnings from a job would be your primary source, while the allowance is considered supplemental.|
|Child Support||Yes||You will need to provide documentation including the Family Law Court Order, bank statements showing a steady deposit history, a letter from your solicitor and a letter obtained from the Child Support Agency (CSA).|
|Disability Pension||Yes||If you receive a disability pension you will need to show proof of a second source of income.|
|Family Tax Benefits||Yes||This applies if you are receiving Family Tax Benefits part A and B. Lenders will look at the age of your children before deciding if this is an acceptable form of income.|
|Foster Care Allowances||Yes||Allowances for foster care are accepted so long as you are receiving another source of income.|
|Overseas Pension||Yes||Only in the event that your pension is coming from one of the following countries: Austria, Belgium, Canada, Chile, Croatia, Cyprus, Denmark, Finland, Germany, Greece, Ireland, Italy, Japan, Korea Republic, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Slovenia, Spain, Switzerland or the United States of America.|
|Veterans and Widows Pension||Yes||While there are typically no conditions to be met, your application will be better received if you have another form of income as well.|
If the benefit you receive from Centrelink is not listed on the chart above, then it may not be considered by lenders as a genuine form of income. In this case it might be best to speak to a lender directly about your options and eligibility.
What you should look for in a home loan
You have many options available to you in a home loan, even if you are receiving Centrelink benefits. To ensure that you are getting the right home loan for your circumstance make sure that you are comparing the criteria and what is being offered by different lending institutions.
- Eligibility criteria. Certain lenders will only accept applications if you are only receiving Family Tax Benefits, while others may count a large family supplement. You will need to look at the restrictions very carefully before applying for a home loan if you are receiving Centrelink benefits. Many lenders will even look at the age of the children in your household and base part of their assessment on that information.
- Lender. Make sure you choose a lender that you think will be understanding of your situation. You’d want a lender to look after you from the start of your mortgage to the end. In the event that you can’t make your repayments, you’d want your lender to understand why, and to know if they offer a repayment holiday.
- Employment. In most cases, Centrelink benefits will only be considered as a secondary form of income. Check to see if you have to be employed as well. If you're filling out a joint application, make sure you determine if your partner needs to hold a steady job.
- Interest rates. Due to your unique circumstances, lenders may attempt to take advantage by offering home loans at a higher rate. Compare rates from lender to lender to make sure you are getting the best deal.
- Extra fees. A lender may impose extra fees for the paperwork involved in considering Centrelink benefits as a second form of income. Read the fee charts carefully and calculate what yours will be for each lender that you are interested in.
Frequently asked questions about taking out a home loan with Centrelink benefits
How does the application process work?
First you should get in touch with a few lenders or a mortgage broker to discuss your options and eligibility. After you’ve found a lender who is willing to assist, you can proceed with the regular application process. Note that you will need to provider extra information about your income.
How much can I borrow?
This will depend on your income, combined with the income from your Centrelink benefit. Your other expenses will also be considered. You can use our borrowing power calculator to give you an indication.