Home Loan on Disability Pension? Here's Hope (2026)

For many Australians receiving a disability pension, home ownership may seem like a distant dream. The good news is, it is possible to secure a home loan while on a disability pension. Although the process can be more challenging, understanding your options and the steps involved is key to turning this dream into reality.

Understanding Home Loans for Disability Pensioners

Being on a disability pension often means navigating financial hurdles, especially when it comes to securing a home loan. Lenders may view pension income as less stable than employment income, but this doesn’t mean you have no options. It’s all about understanding how your income is assessed and what lenders look for in a loan application.

Eligibility, Rates, and Options

When applying for a home loan on a disability pension, lenders will assess your situation based on several factors including your income, assets, and credit history. Here are some key elements to consider:

Interest rates for those on a disability pension can range from 6.49% to 12%, depending on the lender and the specifics of your financial situation. Many lenders require at least a 5% deposit, although a larger deposit can improve your chances of approval and potentially secure better terms.

Steps to Secure a Home Loan on a Disability Pension

Obtaining a home loan while on a disability pension involves several key steps:

1. Assess Your Financial Situation: Start by calculating your total income, including your disability pension and any other income sources, such as part-time work or investments.
2. Check Your Credit Score: A good credit score can significantly improve your chances of securing a loan. Obtain a credit report and address any discrepancies.
3. Save for a Deposit: Aim for at least a 5% deposit. The larger your deposit, the more appealing you are to lenders.
4. Consult a Mortgage Broker: At Esteb and Co, our experts can guide you through the process, leveraging our access to over 83 lenders to find the best option for you.
5. Prepare Your Documentation: Gather all necessary documents, including proof of income, bank statements, and identification.
6. Submit Your Application: With the help of your broker, submit your application and await pre-approval.
7. Consider Government Schemes: Research any available government assistance programs, such as the First Home Owner Grant, which may apply to your situation.

Tips and Considerations

Here are some expert tips to keep in mind:

• Stabilise Your Income: If possible, supplement your pension with stable part-time work or investments to increase your income.
• Consider Co-Ownership: Teaming up with a partner or family member can improve your borrowing power.
• Seek Professional Advice: A financial advisor can offer valuable insights tailored to your unique situation.
• Be Realistic: Aim for a property within your means. Consider the long-term costs of home ownership, including maintenance and rates.

Frequently Asked Questions

• Can I get a home loan with a bad credit score? While challenging, it is possible. Consider lenders specialising in bad credit home loans and work on improving your credit score.
• Are there any government grants I can access? Yes, depending on your circumstances, you may be eligible for the First Home Owner Grant or other state-based incentives.
• How does a deposit impact my loan application? A larger deposit reduces the lender's risk and may lead to better loan terms and lower interest rates.
• What documents will I need to apply? You’ll need identification, income verification, bank statements, and details of any other assets or liabilities.
• Can I add a guarantor to my loan? Yes, having a guarantor can improve your loan application, as it provides additional security for the lender.
• Does my pension type affect my application? Different lenders may have varying criteria for assessing income types, including disability pensions.

Navigating the path to home ownership on a disability pension may seem daunting, but with the right information and support, it is entirely achievable. Reach out to the team at Esteb and Co to explore your options and find a lender that suits your needs.