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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.
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.
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.
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.
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This is an income supplement which is payable to eligible disability pensioners who are renting in the private sector and whose rent is above the national threshold. This threshold varies from place to place.
The rent assistance is 75 cents for every dollar of rent payable above the rent threshold (according to your living situation and number of children in the household).
In certain circumstances, the NDIS will contribute towards the cost of housing for a disabled person in situations where the recipient has a need for specialised housing due to the nature of their disability.
In addition, the NDIS also provides specialist housing and social and community housing subject to waiting lists and eligibility criteria.
Keystart is an initiative of the Western Australian Government which provides low-cost home loans for people on low incomes, including those with a disability. It is only available for WA residents.
These low-cost loans include deposits from as little as 2%, no requirement to pay LMI and no account-keeping fees for home loans.
There are many state government specialist disability accommodation providers who offer accommodation which can be accessed through NDIS eligibility. As disability accommodation is a responsibility of state governments, as opposed to the Federal Government, the services offered vary from state to state, so check with your state government website for more information about specialist disability accommodation in your area.
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© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
