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Home Loans for Disabled People

Find out the options available if you’re a disabled person looking for a home loan by comparing with Savvy today.

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, updated on August 8th, 2023       

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If you receive a disability pension, it may be a little harder to access home loans in Australia, but there are still many options available to you.  Read on to find out more about these options and the many schemes available to help disabled people get home loans.  Savvy can help you compare home loans to make sure you get the best loan for your individual needs.

How do I get a home loan on a disability pension?

There is no such thing per se as a disability pension home loan or a mortgage for disabled adults.  Home loans for disabled people are just the same as those for able-bodied people who may be on a pension or a low income.  It may be slightly harder to get a home loan on a disability pension (compared to someone who has a middle to high income), but it is certainly not impossible.

The greatest hurdles facing disability pensioners seeking a home loan are low income and finding suitable accommodation for their individual needs.  There is no regulated minimum income required to get a home loan, and there are many lenders who are prepared to approve home loans for disability pensioners as long as they can prove that they are able to afford the repayments on the sum they wish to borrow.

As a disability pensioner in Australia, your ability to get a loan is determined by how much your dream home costs, and how much you need to borrow to buy it.  Naturally your income and how much deposit you’re able to offer will determine your borrowing power. The more you’re able to offer as a deposit when applying for a mortgage as a disabled adult, the lower interest rate home loan you may be eligible for.

What is considered ‘low income?

The Australian Taxation Office (ATO) considers low income to be below $37,500 p.a., which means you’re entitled to the full low-income tax offset of $700.   If you’re a disabled person receiving a Disability Support Pension (DSP) of $967.50 a fortnight (which equates to an annual salary of $24,595 a year) or a disabled person working part-time, you may well fall into the low-income bracket.  This compares to Australia’s average weekly earnings of $1,737 a week before tax (which equates to $90,298 per year) according to the Australian Bureau of Statistics, with figures current for mid-2021.

Home loans for disability pensioners - what assistance is available to people on a Disability Support Pension (DSP)?

Potential assistance available to people receiving a DSP (and others on a low income) includes:

Low-deposit home loan options

There are lenders who offer home loans to people with a deposit of only 5% of the property value, but there are no disability pension home loans specifically.  Low-deposit home loans mean you’re able to borrow up to 95% of the value of the property.  However, these low-deposit home loans are not as common as conventional loans requiring the normal 20% deposit and may come with stricter lending criteria, such as a very good credit score or a requirement to pay Lenders Mortgage Insurance.  They may also come with a slightly higher interest rate.

What is Lenders Mortgage Insurance (LMI)?

LMI is an insurance premium that borrowers pay to insure the lender against the higher risk posed by a low deposit (which is defined as a deposit of less than 20% of the agreed value of the property to be purchased).  The amount of LMI you’re required to pay is dependent on the value of the property you want to buy, but can amount to thousands of dollars.  Several first homeowner schemes aim to help people having to pay LMI.

Assistance for first homebuyers

The First Home Owners Grant (FHOG) is a national scheme for first-time buyers which is administered by the states, so it varies depending on where you live.  It comes in the form of either concessions for stamp duty (also known as transfer duty) or a lump sum payment (typically either $10,000 or $15,000) which can be used as part of a deposit or can be put towards the cost of stamp duty.  Check with your state government for details of first home owner assistance which may be available in your state.

First Home Loan Deposit Scheme

This is an Australian Government scheme which assists first homebuyers by guaranteeing up to 15% of the deposit on your home, meaning you only have to find an additional 5% deposit.  It isn’t a cash grant or a deposit: it means the government effectively acts as a guarantor for up to 15% of the value of your home deposit so that you don’t have to pay LMI. This scheme has a quota of a limited number of places per year, so you’ll need to check whether there are any spaces available when you are ready to apply.

What specialist housing support is available for disabled people?

Frequently asked questions about disability pension home loans in Australia

Are there specialist lenders catering to people who receive a Disability Support Pension?

There are many lenders who specialise in offering finance to low-income earners in general, plus there are also private or not-for-profit organisations who provide financial assistance to enable those with a disability to achieve living independence.

Do lenders recognise disability income as a permanent income stream?

Yes – lenders do recognise the Disability Support Pension as a legitimate and permanent form of income, so income from this source will be counted towards the income of the household when a loan application is being considered.

How long does it take to get a home loan approved?

Simple or straightforward home loan applications can be approved within a week or so.  However, if your application is more complicated, or requires more careful consideration due to low income, you can expect to wait up to a month to hear whether your loan has been approved.

Can a disabled pensioner apply for multiple government grants at once?

Yes – multiple state and federal government grants for low income-earners and first homebuyers can be combined to make up a package of assistance to help you get a cheap home loan.

Who can act as a loan guarantor for a disabled person?

Any family member or close friend can act as a guarantor for a loan.  Applying for a loan with a guarantor can assist your loan application or mean you don’t have to pay LMI (or a deposit at all in some cases). However, the guarantor has to be prepared to provide their personal financial information to your lenders and be in a secure financial situation themselves, so they’re able to pay off the full amount of your loan if you’re unable to do so.

Is it a good idea for a disabled person to submit a joint application for a home loan?

Yes – it may be a workable solution for a disabled person who may be on a low income to submit a joint application with a family member or partner.  In a joint mortgage application, both parties become equally responsible for payment of the home loan.

What is the National Rental Affordability Scheme?

This is a scheme introduced by the Federal Government in 2008 which aims to increase the supply of new and affordable rental houses and units for low income and disabled people.  The National Rental Affordability Scheme incentive is given to housing developers in return for providing affordable rental dwellings at least 20% below market rates in that area.

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