Aboriginal and Torres Strait Islander home loans: IBA, the mainstream lenders, and how to choose

What home loan help is there for Aboriginal and Torres Strait Islander buyers?

Home loan help for Aboriginal and Torres Strait Islander buyers comes from two places. The first is Indigenous Business Australia (IBA), which offers its own home loan and takes applications directly. The second is the mainstream lenders, the banks and other lenders anyone can borrow from, together with the government help open to every eligible buyer: the 5% Deposit Scheme, Help to Buy and your state's first home help [1][3].

Buyers weighing this usually want two things: a deposit they can actually reach, and a lender that says yes in a reasonable time. Which path gives you both depends on your own numbers, not on a general rule.

This guide sets the two paths side by side. IBA publishes its own rules, so read IBA's current criteria with IBA itself. What we cover here is how IBA fits alongside everything else, and the mainstream path in full.

What is an IBA home loan?

An IBA home loan is a home loan from Indigenous Business Australia for Aboriginal and Torres Strait Islander buyers. IBA is the lender. It sets its own eligibility rules, its own price limits and its own waiting times, and you apply to IBA yourself.

Money Brain doesn't restate IBA's criteria, deposit or rates on this page. We only print a lender's rules once we've read them at the source, and IBA's rules are best read on IBA's own site or confirmed with IBA directly.

What this means for you: a common reason to look at IBA is the deposit. A smaller deposit is also possible on the mainstream path, through the 5% Deposit Scheme (part 10), Help to Buy (part 15) or a family guarantee (part 14). So IBA is worth a look if it fits you, and it isn't the only way in.

Can a mortgage broker get you an IBA home loan?

No. IBA takes its home loan applications directly, so a mortgage broker, Money Brain included, can't lodge an IBA home loan for you.

What a broker can do is the rest of the picture: work out what a mainstream lender would lend you, which government help you qualify for, and whether that path is quicker or cheaper for you than IBA's. If IBA turns out to be the better fit, the right step is to go to IBA, and we'll tell you so.

Who is eligible for an Indigenous home loan?

Eligibility for IBA's home loan is set by IBA, so check its current rules with IBA before you plan around it.

On the mainstream path, a lender looks at the same things it looks at for any buyer: your income, your debts, your living costs, your deposit and your credit history. Whether a mainstream lender has a policy written for Aboriginal and Torres Strait Islander borrowers is something we check lender by lender. We haven't published that list here, because each lender needs its own dated policy read first.

The government schemes have their own tests on top. For the 5% Deposit Scheme you need to be 18 or older, an Australian citizen or permanent resident, and not have owned property in Australia in the last 10 years, among other things (part 10) [1]. Help to Buy needs every applicant to be an Australian citizen (part 15) [3].

How much deposit do you need for an Aboriginal home loan?

The deposit you need for a home loan depends on the route, not on who you are. At 20% down, a mainstream lender charges no lenders mortgage insurance (LMI). Above 80% of the price, the lender insures itself with LMI, and the premium is yours to pay.

Below 20%, you either pay LMI or use a route that removes it. Here's how the routes compare:

The deposit isn't the only cash you need. Stamp duty, legal fees and other purchase costs come on top, though several states cut or remove stamp duty for first home buyers. See the stamp duty calculator.

IBA or a mainstream lender: which suits you?

Choosing between IBA and a mainstream lender comes down to four things: the deposit you can reach, the price you need to pay, how long you can wait, and the total cost of the loan over the years you hold it.

What this means for you: the better path is the one that gets you into the home you want, at a cost you can carry, in the time you have. Sometimes that's IBA. Sometimes a mainstream lender with the 5% Deposit Scheme gets you there sooner. A lender's own page shows its own offer, not the others side by side on your numbers, and that comparison is the work Money Brain does.

How long does each path take?

How long an IBA home loan takes is set by IBA, so ask IBA how long its process runs at the time you apply.

On the mainstream path the steps are a pre-approval, finding the home, a valuation, formal approval and settlement. Under the 5% Deposit Scheme, once a lender reserves your place you have 14 days to complete the application, and once you're pre-approved you have 90 days to find a home and sign a contract [1][2].

What this means for you: if timing matters, because a lease is ending, a job is starting or the family is growing, the wait can decide the path as much as the deposit does. Ask both sides for a timeline before you commit to either.

Can you apply to IBA and a bank at the same time?

Whether you can hold an IBA application and a mainstream one at the same time is a question for IBA's own rules, so ask IBA before you start both.

Whichever way you go, it helps to know your numbers first. Each home loan application adds an enquiry to your credit file that the next lender will see. One application is normal; several close together can look like someone being turned down. So it pays to find out what a lender would lend you before you apply anywhere, and then apply where you fit.

One rule is fixed on the mainstream side: the 5% Deposit Scheme and Help to Buy can't be used together [1].

What if IBA can't help, or the wait is too long?

If IBA can't help, or its timing doesn't suit you, the mainstream path is still open, and it has more than one way in with a small deposit. The right one depends on your price, your savings and your pay.

Several of these can sit alongside each other, such as state grants with the 5% Deposit Scheme (part 16). Help to Buy and the 5% Deposit Scheme can't [1].

What are the 5% Deposit Scheme price caps where you're buying?

The 5% Deposit Scheme price cap depends on the state or territory and on whether you buy in the capital city and its listed regional centres or in the rest of the state [1]. Both the price and the lender's valuation have to be at or under the cap.

The regional centres that share the capital-city cap are a short list. In Queensland it's only the Gold Coast and the Sunshine Coast, so a buyer in Cairns, Townsville, Cape York or the Torres Strait is on the rest-of-state cap of $700,000 [1]. In the Northern Territory, the capital city cap is $750,000 and the rest of the territory is $600,000 [1].

What this means for you: in Victoria and Queensland the gap between the two caps is $300,000 [1][7]. Check the cap for the exact area before you settle on a home.

What does LMI cost if you buy with less than 20%?

LMI can run from several thousand dollars to tens of thousands, and it climbs steeply between 90% and 95%. Here's what it would cost a first home buyer at three prices, from one insurer's published rate card [5]:

One rate card sits behind these illustrations. They are not quotes. What you pay is set by the insurer, the lender and your loan. The 5% Deposit Scheme removes LMI altogether for buyers who qualify [1].

What this means for you: on a $500,000 home, the difference between paying LMI at 95% and using the scheme is about $16,000 [5][7]. That's money you either borrow and pay interest on, or keep.

Buying as a single parent

Single parents and legal guardians can buy with a 2% deposit inside the 5% Deposit Scheme, with no LMI [1]. You apply on your own; a joint application isn't allowed on the 2% deposit [1].

The other scheme tests still apply: the price cap, the 10-year ownership test and living in the home [1]. The lender still checks that you can afford the loan on your income.

Can family help you buy?

Family can help in two ways. The first is buying together: under the 5% Deposit Scheme a joint application is exactly two people, and they don't have to be a couple. Partners, friends or family members can apply together, but both must pass every test, and three or more buyers can't use the scheme [1].

The second is a family guarantee, where a family member uses part of the equity in their own home to back your loan, so you need a smaller deposit. It's a real commitment for the person who signs, and it's worth them getting their own advice. See guarantor home loans.

Is Help to Buy an option?

Help to Buy is the government's shared equity scheme: the government contributes to the price, so you buy with at least a 2% deposit and borrow less. You own the home and share some of its value with the government [3].

The government's share is up to 30% for an existing home and up to 40% for a newly built one. There are 10,000 places each year [3]. Your income must be at or below $103,000 on your own, or $165,000 for single parents and joint applicants, and every applicant must be an Australian citizen [3].

Help to Buy can't be combined with the 5% Deposit Scheme [1]. See the full Help to Buy guide.

What first home help does your state or territory offer?

Each state and territory runs its own first home help, usually a grant for a new home and cuts to stamp duty. The 5% Deposit Scheme doesn't stop you using state or territory help; the guide says to check those programs with the organisation that runs them [1].

Help to Buy is different: stamp duty concessions and grants still apply, but you can't also use a state shared equity scheme, loan or guarantee [3]. See first home buyer grants by state.

How much can you borrow?

How much you can borrow comes down to three things: what a lender counts of your income, your debts, and your living costs. Banks then check you could still make the repayments if rates were at least 3 percentage points higher, the buffer APRA expects banks to use [4].

That's why the same buyer can get quite different answers from two lenders. See how much can I borrow.

What income do lenders count?

Lenders count your base pay first. What changes the answer is how each lender treats the rest: overtime, allowances, casual or seasonal work, a second job and government payments. Lenders differ on how much of each they count, and on how long you need to have been in a job before they count it.

If your income comes from several places, or changes through the year, the lender you pick matters more. Bring payslips that show each part of your pay on its own line, and last year's income statement.

How are remote homes and community land treated?

A home loan is secured by the property, so a lender needs a title it can take a mortgage over, and a home it could sell if the loan wasn't repaid. That's why the type of title and the location can matter as much as your income.

Lenders limit lending at a high share of the price on some properties, whatever the buyer's income: certain postcodes, small or high-density units, and unusual properties. Land held by a community, or under a lease with conditions on who can own it, may not be accepted by a mainstream lender at all.

What this means for you: if you're buying on or near community land, or somewhere remote, have the title type checked before you go further. It's often the real question, and it's quicker to answer before you've found the home than after.

Building a new home

Building with the 5% Deposit Scheme has its own clock. The building contract must be signed within 6 months of settlement, building must start within 12 months and finish within 36 months, and you move in within 6 months of the occupancy certificate [1].

The builder must be licensed, registered and insured, on a fixed-price contract; owner-builder contracts aren't eligible. If you already own the vacant land before you secure a scheme place, you can't use the scheme to build on it [1]. See construction loans.

Can you get a home loan with past credit problems?

A past credit problem doesn't always rule out a home loan, but lenders differ a great deal in what they accept, and how long ago it happened matters. The first step is to read your own credit file, line by line, before you apply anywhere.

See bad credit home loans for how lenders read defaults, late payments and enquiries.

What does a broker cost you?

How a broker is paid, and the rule Money Brain holds against it, is set out in full on its own page: what a mortgage broker costs.

Your first move

You've seen both paths. Now there's one question left: which path, and which lender, for your income, your savings and the home you want? That's what Money Brain works out with you, with IBA kept in the comparison from the start.

When you're ready, the closing section below is the simplest way to start.