Centrelink Home Loan

How you can still buy a home while on Centrelink payments.

Centrelink Home Loan

There’s a common misconception that receiving government payments will take away your ability to successfully apply for a mortgage. However, there are ways to get a home loan while receiving Centrelink benefits. Read more to find out how you can be approved for a home loan on Centrelink.

What is a Centrelink home loan and how does it work?

A Centrelink home loan works in the same way as any other standard home loan, but with one key difference: Centrelink benefits are pledged as part of the borrower’s income in the application. Not every lender will accept these payments for a home loan application, but you’ll have a variety of options for lenders that do. A key point to note is that Centrelink benefits alone are not enough to convince a lender of a home loan’s affordability for you. You won’t be approved for a home loan on unemployment benefits, for example. As such, they must form only part of your income as a supplement to income from your casual or part-time job.

Alternatively, if your partner holds stable employment and income, your application could be accepted even if you’re unemployed. Sharing your total income with a partner will be a major help to your home loan application, but it’s certainly not the be-all and end-all. Single parents are still given a fair shot at applying for a home loan if they’re earning enough on top of their benefits and also have enough in their savings to afford it.

Which Centrelink benefits can I use to supplement my home loan repayments?

There are a number of different benefits that you can list as secondary income streams when it comes to applying for your home loan. Read our table below to find out if your benefit/s are eligible to be put towards your home loan repayments.

Benefit type Conditions/supporting documentation
Family Tax Benefits
Accepted by most lenders, sometimes conditional on the age of your children. If your children are over 11 years old, fewer lenders will accept this as a primary source of income.
Child Support/ Maintenance
Supporting documentation of Family Law Court Order, bank statements, letter from solicitor and letter from Child Support Agency.
Veterans & Widows Pension
May be accepted as extra income by some lenders, with a statement from the Department of Veteran Affairs showing your payment history, as well as bank statements.
Age Pension
Only as supplementary income.
Carer’s Allowance
Only as supplementary income.
Disability Pension
Valid income for most lenders but usually requires an additional source of income to prove ability to meet loan repayments.
Foster Care Allowances
Requires second source of income.
Other benefits
Only as supplementary income.

How much will I have to pay for a deposit on my property bought with a Centrelink home loan?

Despite what you may think, prospective borrowers on Centrelink can access a loan-to-value ratio (LVR) up to 95% on their home loan under the right circumstances. The LVR your lender is willing to grant will depend almost entirely upon your financial history and future capability; if you ask for a 95% LVR when you’re in a sticky financial situation, you probably won’t be approved. However, if you’re receiving Centrelink payments on top of your income and your partner is earning enough on their own, a lender might decide that a similar loan is affordable for you.

In terms of what size deposit you’ll be able to afford, you’re able to use your combined, or sole, income to determine how much your deposit might be worth. For example, if you can afford a $20,000 deposit with funds left over, you would, in theory, be able to be approved for a loan on a $400,000 property under the right financial circumstances.

Will I be able to secure a low interest rate on my Centrelink home loan?

Yes – receiving Centrelink payments in themselves won’t discount you from being offered a low interest rate on your home loan. If Centrelink forms part of your income to supplement a stable job that you’ve been working in for a while and your partner earns a comfortable living, there’s every chance that you’ll be offered an interest rate that you’re happy with. If you’re low-income earners, there’ll be lenders on the market that are willing to offer you home loans at a discounted interest rate with more affordable fees and lower repayments to help you manage your finances. Interest rates can make a huge difference to what you’ll end up paying on your home loan, as this table shows:

Interest rate Repayment amount per month Monthly saving** Total amount repaid Overall saving**
4%
$1,432.25
N/A
$515,608.52
N/A
3%
$1,264.81
$167.44
$455,332.36
$60,276.16
2.5%
$1,185.36
$246.89
$426,730.57
$88,877.95
2%
$1,108.86
$323.39
$399,189.03
$116,419.49

*Table estimates are calculated using a $300,000 home loan with a 30-year loan term. Does not include monthly fees.

**Saving compared to 4% interest rate.

Which documents will I need for my Centrelink home loan application?

Take a look below at some of the documents that you’ll need to supply to your lender when you’re applying for a home loan on Centrelink.

Frequently asked Centrelink home loan questions

Have a question we haven’t answered yet? We’ve listed some common queries about Centrelink home loans for you.

Are there any other initiatives that might help me with my home loan application if I’m on Centrelink?

Yes – state and territory governments, as well as the federal government, have established schemes which can help low income earners out with their home loan applications.

Can I still receive the First Homeowners Grant if I’m receiving Centrelink payments?

Yes – provided it’s your first home, of course! Like home loan schemes for low-income earners, eligibility criteria for FHOG recipients will vary from state to state. You can read more about buying your first home here.

How do I work out how much I’ll be able to borrow for my Centrelink home loan?

It’s actually simpler than you might think – there are calculators online that crunch the numbers for you. Calculate your weekly or monthly income and compare that to different loan amounts using a calculator to see what you think could be a manageable total to pay back.

Does my credit score matter when applying for a Centrelink home loan?

Yes – credit history is one of the most important indicators to lenders of your ability to repay borrowed funds. You can improve your credit rating by paying off any outstanding debts and lowering existing credit card limits.

Can I be approved for a home loan if I’m a single parent on Centrelink?

Potentially – provided you meet the lender criteria and are currently employed in a stable job, there are home loans available to single mothers or fathers on Centrelink. However, many prospective borrowers in this position may find that their lender’s eligibility criteria discounts them due to a lack of income.

Will being on disability support rule me out of being approved for a home loan?

No – lenders will usually accept home loan applications from borrowers on disability support on the condition that these payments are only supplementary to any other income, such as your own or your partner’s. If you’re single and receiving disability support, with or without a substantial income, it’s unlikely that you’ll be approved for your home loan.

 

Can I add a mortgage offset account to my Centrelink home loan?

Yes – an offset account is a great way for borrowers to reduce the total left on their home loan repayable with interest. This isn’t the case across the board, though, so double check with your lender to see if you’ll be able to add one to your loan.

If I’m self-employed and receive Centrelink payments to supplement my income, can I still be approved for a home loan?

You can – but it’ll probably be more difficult than if you’re an employee in a more conventional employment setup. As is the case for single parents, it’s probably unlikely that you’ll be able to service your home loan with your income. The documentation requirements differ as well, so you may have to apply for either a full doc, low doc or non-conforming home loan as a result. Read more about self-employed home loans here.