Home loans for public servants

If you are in a government job, lenders consider you a member of a low-risk borrower group. As a result, government employees and public servants can get waivers on Lenders Mortgage Insurance (LMI) and special home loan interest rates.

If you are a government employee or public servant, here’s what you need to know before applying.

LMI waivers and discounts

LMI waivers

Most people who apply for a home loan are required to take LMI if their deposit is less than 20% LVR. Even though there are no specific LMI waivers for government employees, most lenders are willing to waive the LMI if you work in the public sector.

You may be able to borrow up to 85% LVR on your property without taking LMI, which is slightly higher than normal.

Special discounts

As a government employee you may be able to get:

• Discounted interest rates that are not advertised to the general public, provided you are getting a loan above a certain limit.
• Exceptions to lender credit policies.
• Potential to borrow more, but this may depend on your individual circumstances, your income, and the lenders’ credit policies.
• Use of salary sacrifice in assessment to help you leverage higher borrowings.

Eligibility criteria

Here’s what a typical public servant must have in order to qualify.

• Payslips to prove your current income.
• Evidence of any salary packaging or fringe benefits you receive.
• A clear credit report with no late payments in your recent history.
• Proof of stable employment. Some lenders may give preference to federal and state government employees over those in local government employment. Others may apply similar eligibility criteria for all who work in public sector jobs.

There are no specific income eligibility criteria for government employees because of the wide range of pay levels within the public service.

Alternative options

While these alternatives are not specifically meant for government employees, you may qualify for them depending on your income bracket. These and other government schemes may help cover total or partial costs of your home loan.

First Home Owner Grant (FHOG)

This national scheme is funded by the states and territories. It offers a one-off grant to first home owners satisfying eligibility criteria. Rates and conditions vary by state and territory. Tasmanians, for example, can get a FHOG up to $20,000 and a 50 per cent concession on their property transfer duty when buying a first home where the home value is less than $400,000.

More information is be available on your state or territory’s revenue website:

• ACT
• NSW
• NT
• QLD
• SA
• TAS
• VIC
• WA

First Home Loan Deposit Scheme (FHLDS)

This scheme allows eligible applicants to get a home loan with a deposit as low as 5% LVR and without LMI because the government comes in as a limited guarantor.

FHLDS is only for owner-occupiers who have not previously owned a property in Australia or had an interest in one. You are eligible for the scheme only if you make less than $125,000 or less than $200,000 total income with your partner. FHLDS is available only through a few lenders. If you have saved enough to cover 20% of the loan value, you are not eligible for it.

Visit the National Housing Finance and Investment Corporation (NHFIC) website for more information on FHLDS and other home purchase support schemes.

Considerations

Investment property

LMI waiver thresholds and discounts when purchasing a second home or investment property vary between lenders. Consult your bank or mortgage broker about what is available for you. Some professional packages may also include LMI waivers and discounts.

Defence Housing Australia investment property

DHA has investment opportunities for a range of investment properties across the nation. Properties include townhouses, units, and houses.

For DHA investment properties you may:

• Borrow 95% of the property value or up to 97% of purchase price to cover your LMI.
• Borrow up to 90% with no LMI.
• Borrow up to 100% of property value with a guarantor.
• Borrow up to 100% of your rental income less management fees, which is normally 16.5% of rental amount. That means some lenders may accept 83.5% of the rental income.

If you are a Defence Force member buying a DHA property, keep in mind that your entitlements may be affected if you have been posted to the same location as your investment property.

Is a professional package right for you?

Professional packages are for those who wish to borrow more than $250,000 and want other facilities beyond a home loan, for example a transaction account or a credit card. Some packages may offer favourable terms for investment properties with LMI waivers for government employees.

Consider working with a mortgage broker

Mortgage brokers work with many lenders and have the ability to offer you a wide range of home loan options. An experienced mortgage broker can save you time and help find the most advantageous deals for government employees, including LMI waivers and special discounts on interest.

Find a mortgage broker with Finty.