If you're receiving Centrelink payments you can still get a home loan, but the application process is a little tougher.
Receiving Centrelink benefits doesn’t necessarily mean giving up your dream of owning a home. There are lenders who accept some Centrelink payments as part of your income. You'll need to do some research or contact a mortgage broker to find out which lenders can help you.
How do mortgages for people on Centrelink work?
If you're on Centrelink your home loan will be the same as any other: you save a deposit and then borrow money, which you pay back with interest. But if you're looking for a lender which accepts Centrelink payments as a form of income then you have fewer options. Not all lenders accept Centrelink payments as income. And those that do have a stricter application process.
That's why getting in touch with a mortgage broker is a good idea. Brokers specialise in finding loans for borrowers in unique circumstances.
Example: Jane applies for a home loan while on Centrelink
Jane is a divorced mother of two children. She has a job and receives the Child Support payment. She has saved a deposit and is looking for lenders who will accept her Centrelink benefits as a 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.
Is my Centrelink benefit accepted by lenders?
Not all Centrelink benefits will be considered by a lender as an acceptable form of extra income. 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.
How to find a mortgage while receiving Centrelink payments
Make a strong application
- Get your documents together. Make sure you collect all the necessary documents for your mortgage application, including bank statements, payslips and identity documents.
- Avoid 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.
Find the right lender
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. Look at the restrictions very carefully before applying for a home loan if you are receiving Centrelink benefits.
- Lender. Make sure you choose a lender that you think will be understanding of your situation.
- 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, check if your partner needs to hold a steady job.
Watch out for...
- Higher interest rates. Due to your unique circumstances, lenders may only offer you a home loan at a higher rate. Compare rates 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.
- Higher LVR. Your lender may restrict how much you can borrow (known as a loan-to-value ratio) to 80% of a property's value or lower.