In recognition of the unique financial situations that Indigenous Australians face in the property market, the Australian Government has implemented a series of home loans just for the Indigenous populace.
If you are an Indigenous Australian, you may be eligible for one of these home loan specifically created to help you buy the home you want.
This article will cover all home loans available to Indigenous Australians, how to be eligible, their benefits, and how to apply for one.
Indigenous Business Australia (IBA) Home Loans
Through Indigenous Business Australia (IBA), the Australian Government supports concessional low-interest, low-deposit loans to Aboriginal and Torres Strait Islander people who want to buy their first home but cannot access mainstream lenders.
IBA housing loans enable Aboriginal and Torres Strait Islander customers to obtain property in a wide variety of forms. This includes:
- Buying an established residential property
- Purchasing land
- Constructing a new house
- Buying an existing home
- Implement critical upgrades to a home
The amount that the IBA may lend to eligible first home buyers will depend upon the applicant’s financial situation, such as income and ability to make housing loan repayments.
Moreover, the IBA may not always offer the total amount required to purchase a home. In such cases, eligible applicants may have to access further funding from another lender like a bank or credit union.
In addition, the IBA offers a range of loan products for other housing needs. For example, financing for essential renovations or home improvements, or refinancing an existing loan the case of a change in the financial circumstances that would lead to the family home being sold.
Assistance in the form of remote Indigenous housing loans is also available to customers living in remote areas, or who may be relocating from a remote area.
Conditions and Eligibility for IBA Housing Loans
The IBA will conduct a complete assessment of an applicant’s eligibility and formal application for a loan consistent with the policies and processes of IBA’s Indigenous Home Ownership Program.
To qualify for loans for Indigenous Australians, you must meet the following eligibility requirements:
- Descent: You must be of Aboriginal or Torres Strait Islander descent. Where there are joint applicants, at least one applicant is required to meet this requirement.
- Age and Citizenship: You must be an Australian or permanent resident over 18 years of age.
- Deposit: IBA's deposit requirements are lower than mainstream lenders, but you must contribute the maximum amount available for the deposit.
- Borrowing Capacity: You must be able to make your home loan repayments to your credit provider, and must not have recently applied for bankruptcy.
- Intent: You should have the intention to live in the home as your primary residence and not use it as an investment property.
What is the Interest Rate?
As of 16 August 2022, IBA's variable home loan rate for owner-occupied homes is 4.64% (subject to change at any time).
The rates on IBA's Indigenous home loans are determined by three factors:
- IBA's standard variable home loan rate
- Your personal circumstances, and
- Your loan requirements.
Furthermore, IBA reviews its Home Loan Rate monthly to ensure parity with the average standard variable rate of major lenders in the banking industry. Your loan agreement will provide details of the interest rate on your IBA home loan, and how it may vary during your loan term.
Discounted Interest Rate on IBA Housing Loan
To support customers, including first home buyers with low to moderate income, entering the housing market, IBA offers a discounted interest rate when the loan commences.
Starting from a low rate for a specific period, the interest rate increases yearly (in March) until it touches the IBA Home Loan Rate. The discounted rate is based on your income when your housing loan application has been approved for an IBA home loan.
Per details published on the IBA website, you can access the following rates if you're an eligible first home buyer:
Total Gross Income (Up to $75,670)
- Starting Interest Rate: 1.14%
- Incremental Rate: 0.25%
- Starting Rate Period: 24 months
Total Gross Income ($75,671 - $124,634)
- Starting Interest Rate: 2.14%
- Incremental Rate: 0.25%
- Starting Rate Period: 12 months
Total Gross Income ($124,635 - $146,890)
- Starting Interest Rate: 3.14%
- Incremental Rate: 0.25%
- Starting Rate Period: 12 months
Total Gross Income ($146,891 - $222,560)
- Starting Interest Rate: 4.64%
- Incremental Rate: N/A
- Starting Rate Period: N/A
The details related to the total gross income values, rates and introductory periods are effective as of 3 September 2021. They are also subject to change at any time.
You may have to obtain part of your funds from another credit provider if you are on a higher income. However, you may receive an extended starting interest rate on your IBA loan of 2.14%, which will be capped for a minimum period of 3 years.
What are the Fees for an IBA Home Loan?
The following loan administration fees for IBA housing loans are effective from 1 September 2013, and are subject to change at any time:
Discharge of Mortgage Fee ($330)
This fee applies when you finish paying off your loan, sell a portion or all of your property, or refinance your home loan with other lenders. Our Home Loan Refinance Calculator will help you determine how much savings you could make by refinancing your home loan.
Security Dealing Fee ($165)
You have to pay this fee when the IBA needs to produce the original title for a property which it has a mortgage over. For example, if you have to implement a name change on the title, the IBA may need to provide the title to the relevant offices in your state/territory.
Late Payment Administration Fee ($20)
You will need to pay a late fee when your loan instalments remain unpaid longer than 28 days after the due date and no alternative arrangements have been made.
Other Government Fees and Charges
These vary depending on the loan amount, the state/territory where the property is located, amongst other factors.
How to Apply for an IBA Housing Loan?
These steps will help you organise and prepare your application, making your home loan journey as smooth as possible.
Registering Your EOI:
First, you must complete the online Expression of Interest (EOI) form to indicate your interest in IBA home loans. At this stage, you should be ready with your financial information, an idea of how much you intend to borrow, and at least one identity document; i.e., a passport, driving licence, or Medicare card issued by the Australian Government.
The IBA will then assess your EOI. You will be added to the register and invited to apply if found eligible.
Alternatively, the team will contact you to discuss how you can enhance your application. Due to high demand, this process may take around 3-6 months.
Lodge Your Application:
If you have met the eligibility criteria you will be invited to apply for a home loan. The next step is submitting a formal home loan application and other supporting documents for assessment.
The verification process includes evidence of or an analysis of your:
- Aboriginal or Torres Strait Islander descent
- Rental and credit history
- Living costs and expenses
- Debts or liabilities
The IBA uses Equifax for credit reference checks. If you would like to know your credit ranking, you can request a copy of your credit report from the Equifax website for a small fee.
Once you successfully meet all the criteria, you will be advised about pre-approval and how much you can borrow.
You can begin looking for a suitable home to buy at this stage. However, until your loan is pre-approved, you should not make any offers on a property or enter into a sale contract.
Apply with Another Mainstream Lender:
Supposed, based on your circumstances, the IBA may cover only part of the funds needed to buy a home. In that case, you will have to borrow the remaining funds from another lender to complete your purchase.
How Do IBA Loans Differ From Traditional Lenders?
An IBA loan aims at helping Indigenous Australians buy their own home quickly. In that sense, IBA Loans differ from loans by other major lenders on the following lines:
The loan amount the IBA may offer will depend upon your financial situation, including your income and other affordability factors. Regardless, most lenders will allow eligible applicants to borrow the entire portion of the home loan needed to buy the home.
On the other hand, the IBA may not always offer the entire sum required to purchase a home. In such a scenario, you may have to obtain funding for the remaining part from another lender.
Indigenous Australians Home Loan Deposit for First Home Buyers:
Compared to mainstream lenders, the IBA's deposit requirements are much lower. The minimum deposit amount you'll need to put down may depend on your income.
The minimum deposit required for first home buyers, effective as of 3 September 2021 (subject to change at any time), is as follows:
- Total Gross Income Up to $75,670: Minimum deposit amount is $1,500.
- Total Gross Income ($75,671–$124,634): Minimum deposit amount is $3,000.
- Total Gross Income ($124,635–$146,890): Minimum deposit amount is 3% of the home's purchase price.
- Total Gross Income ($146,891-$222,560): Minimum deposit amount is 5% of the home's purchase price.
Indigenous Home Loan Deposit for Other Indigenous Australians Home Loans:
These loans include:
- Housing finances for previous home owners
- Home improvements
- Fee finance
- Property settlement.
- Purchasing residential land.
The minimum deposit required for other IBA loan products, effective as of 3 September 2021 (subject to change at any time), is as follows:
- For Previous Home Owners: The minimum deposit amount is the net proceeds from the sale of the previous home. However, it must not be less than the minimum deposit requirement for first home buyers.
- For Home Improvement, Refinance or Property Settlement: The minimum deposit amount is 5% of the property value.
- For Purchase of Residential Land: The minimum deposit amount is 5% of the purchase price or $10,000 (whichever is lesser).
- Fees: The IBA does not charge loan application fees or Lenders Mortgage Insurance (LMI). This could save you thousands of dollars on the cost of your home loan.
- Interest Rates: Unlike other lenders, the interest earned by IBA is not for making profits. Instead, the interest on Indigenous Australians home loans is reinvested to enable more eligible home buyers to enter the property market. In addition, the IBA supports Aboriginal and Torres Strait Islander individuals looking to enter the housing market and get their first home ownership quickly. It offers buyers with low to moderate income a discounted interest rate when the loan commences.
- Redraw and Offset: The IBA does not offer redraw facilities and offset accounts, which traditional lenders typically provide.
- Loan Term: IBA home loan terms are usually 32 years. This may be reduced or extended based on the individual's circumstances.
State & Territory-Specific Assistance Programs
All home loan assistance programs for Indigenous Australians, except the national Indigenous Home Ownership Program and Remote Indigenous Housing Loans, are State or Territory-specific. The Australian Capital Territory and Tasmania follow the federal administration of these programs.
Listed below are the different programs through which Indigenous Australians across Australia can access a low-interest home loan.
South Australia: Affordable Homes Program and HomeStart Finance
If eligible, HomeSeeker SA grants you exclusive access to a specific range of properties across SA priced below $479,550. Some properties are available only for a limited time before they sell on the open market.
Likewise, the Finance Starter Loan could provide up to $10,000. It is based on these critical factors:
- Your Net Household Income: It must be less than $65,000 for singles (and $90,000 for couples)
- Ownership: You do not own another property
- Financial Situation: You can cover the deposit but not the remaining upfront costs, i.e., Stamp Duty, and similar costs
It comprises of a five-year term during which you do not have to make repayments, nor is any interest charged during those five years.
Northern Territory: Home Ownership Sublease
Under a Township Lease, eligible community residents in the Northern Territory may be able to secure long-term Home Ownership Subleases to buy or build their own home.
A Home Ownership Sublease is similar to an ordinary freehold title in Darwin and Alice Springs. Financial institutions such as Indigenous Business Australia or banks can issue home loans and help eligible community residents get home ownership.
Western Australia: KeyStart's Aboriginal Home Loan
The Aboriginal Home Loan options enable more Aboriginal and Torres Strait Islander peoples to access affordable home loans.
This initiative by the Government of Western Australia comprises two types of loans: full ownership and shared ownership. It is a low-deposit loan and does not require LMI. Moreover, it's a shared ownership loan.
As the Housing Authority co-owns a share of the property with you, it will reduce your loan amount.
New South Wales: Home Ownership Co-Contribution Scheme
The AHO Home Ownership Deposit Co-contribution Scheme grants eligible Aboriginal peoples one-time financial support in New South Wales. They include:
- Home Buyer Booster Grant: A one-time assistance for eligible Aboriginal community members having home ownership legal expenses. The maximum funding accessible is $2,500.
- AHO Deadly Deposit Grant: A one-time contribution for eligible Aboriginal social housing tenants. It can match people's savings on a $1:$1 basis towards the deposit contribution. The maximum contribution is $10,000.
- AHO Tenancy Plus Grant: A one-time contribution for eligible long-term AHO tenants seeking to increase their home deposit. It factors the length of tenure and solid tenancy history for a bigger deposit co-contribution.
Victoria: HomesVic Aboriginal Victorians Shared Equity Program
The Victorian Homebuyer Fund is a shared equity scheme for eligible participants. Aboriginal and Torres Strait Islander peoples have to only pay 3.5% of the property purchase price as a deposit. Furthermore, you are eligible for a 35% shared equity contribution per the program.
The Victorian Government does not charge interest on its investment in your homes. Nonetheless, it will share any capital gains or losses proportionate to its share in your property under this program.
Queensland: Remote Home Ownership Program
Aboriginal and Torres Strait Islander peoples living in communities on DOGIT land can apply for a home ownership lease for 99 years. The 99-year home ownership lease enables you, as a leaseholder, to apply for a loan to purchase an existing or new dwelling on vacant land.
The Queensland Government has pledged to provide up to $1.08 billion until 2028 for better housing for Aboriginal and Torres Strait Islander Queenslanders living in remote communities.
You will still have to contribute payments towards certain aspects:
- The upfront cost of the land
- The annual rental lease charge of not more than $1
- The purchase price of the existing house, or the cost of building a new home on the vacant land
Can You Access Other Government Grants with an IBA Home Loan?
The IBA will assess your application and inform you if you will qualify for the Government's Home Guarantee Scheme (HGS).
The scheme enables eligible home buyers to easily buy their homes by offering participating lenders a limited guarantee of up to 18% of the property purchase price. Furthermore, as LMI does not apply to the IBA, it will help you save thousands on the cost of your loan. Even better, you may be able to refinance to another participating lender later on.
You may also be eligible to access First Home Owner Grant (FHOG), and rebates or exemptions offered by State and Territory governments.
Joust's insights on First Home Buyer Grants 2022 can help you familiarise yourself with the grants and schemes available for first home buyers.
How Joust Can Help Your Home Loan Journey
If you’re an Indigenous Australian, you may be eligible for a home loan with special conditions and features to help you buy the home you want.
However, if you have saved up a significant deposit, you may want to try and get a home loan with a mainstream lender. This way, you may be able to benefit from competitive interest rates and pricing.
Our Instant Match technology will help you find the right loan for your circumstances from reputed Aussie lenders. Just enter your loan requirements once, and we will do the rest. Then all you need to do is compare the results and choose the most suitable deal.
Who is Indigenous Business Australia?
Created in 1990, the IBA helps Indigenous Australians enhance their economic development and wealth creation opportunities.
In line with its vision, the IBA offers loans and financial services to help Indigenous Australians enjoy stable housing. This includes the administration of the Australian Government's Indigenous Home Ownership Program (IHOP). It also supports business and investment initiatives of Indigenous peoples.
Does IBA do Credit Checks?
Yes, the IBA conducts credit checks using Equifax to verify if the information provided is an accurate representation of your EOI submission.
If you would like to know your credit ranking, you can request a copy of your credit report from the Equifax website. A small fee is applicable for this service.
The information in this article is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.