It's easy to feel locked out of the home loan market if you're on a low income. Despite interest rates being low, your options may still be limited especially with some of the big lenders tightening their lending policies.
But there may be some alternative you can explore, particularly if your government income is supported by paid employment.
Can I get a home loan with government benefits as my income source?
While Lenders may consider Centrelink or other regular government payments as a form of income, you might find it difficult to obtain a home loan if this is your only source of income. This is because lenders are looking to see if you will be able to afford to repay the loan without compromising on your everyday living expenses.
The government benefits that may count as valid income include:
- Carers Allowance
- Disability Support
- Long Term Pensions (War/Widow's pension)
- Family Tax Benefits (Parts A & B)
To improve your chances of being approved, it’s better to have dual income when applying for a home loan: income from government assistance, and another form of income such as paid employment.
In addition to your income amount, your overall situation also plays a big part in whether a lender will accept these benefits as valid income. Factors such as credit history, regular living costs, length of employment and ability to pay back the loan amount, will be considered when a lender assesses your application. Low income earners are generally seen as easy targets by dishonest lenders. Make sure you read every document that is given to you carefully, and make sure you understand it. If you don’t understand something, seek independent financial advice.
How do I qualify for a low income loan?
While there is no surefire way to guarantee your loan eligibility, it could be worthwhile speaking to a lender (like us at Pepper Money) about what additional income sources can be counted towards your loan, as you could look to add up your income from different sources. Another way to increase your chances of being approved is to reduce the loan size, which could be achieved by increasing your deposit or looking for a smaller or alternative property.
At Pepper, we consider alternative income sources, including government benefits when evaluating your loan application, however this must be supplemented by another form of paid income. Find out more information about the types of income Pepper accepts towards a home loan.
We will talk one on one with you to understand your situation in full, and always complete a comprehensive personal credit assessment of each application to make sure we’re able to provide you will a home loan that will genuinely meet your needs. And most importantly, that won’t put you in a loan that you can’t afford. You can read more about Pepper’s responsible lending practices here. Alternatively, speak to a Lending Specialist on 137 377 to discuss your options.
Preparing for a home loan with low income.
While having low income can make things challenging, there are some simple strategies you can implement to put you on the front foot towards buying a home.
- Understand Your Cashflow - Working out where and when money comes in and out can help you work out a plan to stay on top of your bills and then work out how much you might be able to borrow. To get an idea of your current borrowing power, use our handy online calculator.
- Reduce Debt - Debt is seen as a liability by lenders, so it’s important to work out how much debt you have and how you can chip away at reducing it. Your budget will be able to help you work out how you can start to reduce the amount of debt you have.
- Saving for a Deposit - Most lenders require a minimum of 10% of the price of the property you wish to buy, so it’s important that you have enough savings for a deposit. Our savings calculator can help you work out how quickly you can save for a deposit based on your current budget.
- Help from a Guarantor – Lenders may consider you for a loan with help from a guarantor (a family member or friend who will be responsible for paying back the loan if you are unable to). There are quite a few legal ramifications of having a guarantor, so make sure you speak to your Lender to understand how this process works.
If you’re finding it hard to get a home loan with low income or have questions about your eligibility, the best thing to do is to speak to one of our friendly Lending Specialists on 137 377 or submit an enquiry online.
This article provides you with factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. Neither Pepper nor its related bodies, nor their directors, employees or agents accept any responsibility for loss or liability which may arise from accessing or reliance on any of the information contained in this article. For information about whether a Pepper loan may be suitable for you, call Pepper on 13 73 77 or speak to an accredited Pepper Money broker.
All applications are subject to the credit provider’s credit assessment and loan eligibility criteria. Terms, conditions, fees and charges apply. Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
©Pepper Money Limited ABN 55 094 317 665; AFSL 286655; Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.