Are you in the Australian Defence Force (ADF)? Did you know that you may be eligible for home loan subsidies under the Defence Home Ownership Assistance Scheme (DHOAS)?

We’re experts in lending to people in the Army, Navy and Air Force and we know lenders that want to reward you with incredible mortgage discounts for your service.

Incredible Discounts

Subject to your length of service with the ADF, you may be eligible to:

  • Borrow up to 95% of the purchase price: We know lenders that will accept lump sum payments, overseas combat bonuses, defence force subsidies and other benefits that you receive as a member of the ADF when they assess your income. This increases your borrowing power. Lenders mortgage insurance (LMI) will apply.
  • Discounted interest rates: 0.8% off the standard variable rate.
  • ADF interest rate subsidies: The monthly subsidy you may be eligible for is equivalent to 37.5% of the median interest expense on the portion of the loan that is being subsidised, calculated over a 25 year period, regardless of the term of the mortgage. The proportion of your home loan that is subsidised varies depending on your level of service and other factors.
  • Government home buyer benefits: You may be eligible for further assistance under the Home Purchase Assistance Scheme (HPAS) or the Home Purchase or Sale Expenses Allowance (HPSEA).
  • Investment loans: Borrow up to 80% and get interest only (I/O) for up to 5 years with select lenders.
  • Loan term: Up to 20 years without warlike service and up to 25 years if warlike service is completed.
  • Construction: Government subsidies can be combined with a contruction loan, improving your borrowing power. Variable interest rates are available and interest only repayments on offer from one of our lenders.
  • Guarantor: Government subsidies can also be combined with a guarantor loan, improving your borrowing power.

Call us on 1300 889 743 or complete our free assessment form to discover if you qualify for these home loan discounts exclusive to members of the ADF.

Do you qualify for a Defence Force Home Loan?

To be eligible:

  • You don’t have to be in the defence force right now. As long as you’ve served in the ADF in the past two years, you qualify.
  • You must have completed a minimum qualifying period, or in some circumstances, foreign service.
  • You need to have what is known as ‘service credit,’ which you start accruing after effectively completing the qualifying period, i.e. four years Permanent service or eight years Reserve service. You can then exchange the service credit for subsidy payments.
  • There may be an expectation that you will continue to serve in the ADF for at least the next 12 months.

You’re required to live in the premises for at least 12 months in order for your loan to be approved. However, you’re entitled to keep your loan if you receive a posting and are required to move before the minimum 12 month occupancy requirement.

What kind of subsidy can I get?

One of the factors that determines the monthly DHOAS subsidy amount you receive is the length of your service in the military, which is broken up into three tiers.

The progression from one tier to the next varies depending on whether you are a Permanent or Reserve Member of the ADF.

To reach tier 1, the requirements are:

  • 4 years service for Permanent Members
  • 8 years service for Reserve Members

To reach tier 2, the requirements are:

  • 8 years service for Permanent Members
  • 12 years service for Reserve Members

To reach tier 3, the requirements are:

  • 12 years service for Permanent Members
  • 16 years service for Reserve Members

Your length of service has a direct correlation with the subsidy amount you’re eligible for:

Tier 1

The maximum subsidy available is up to 40% of the average home price as at 1 July of the previous year. The following subsidies are verified correct and up-to-date.

Subsidised loan amount: $280,127

Maximum monthly subsidy: $239

Tier 2

The maximum subsidy available is up to 60% of the average home price as at 1 July of the previous year. The following subsidies are verified correct and up-to-date.

Subsidised loan amount: $420,190

Maximum monthly subsidy: $358

Tier 3

The maximum subsidy available is up to 80% of the average home price as at 1 July of the previous year. The following subsidies are verified correct and up-to-date.

Subsidised loan amount: $560,254

Maximum monthly subsidy: $478

How is the subsidy calculated?

The ADF home loan subsidy is paid to your mortgage account at the beginning of each month but it varies depending on:

  • The median rate of Owner Occupied Standard Variable Home Loans offered by the major home loan providers according to CANNEX (AUST) Pty Ltd.
  • Australia’s average home price on 1 July of the previous financial year.
  • What “tier” you fall under based on your length of service with the ADF.

The payment you receive is equivalent to 37.5% of the CANNEX median interest rate, albeit your subsidy amount will vary on fluctuations in the median rate of CANNEX Owner Occupied Standard Variable Home Loans.

There’s also an 8.95% interest cap meaning your subsidy payments will never exceed this ceiling.

Apart from CANNEX and your length of service, your monthly subsidy is also determined by the average home price at 1 July of the previous financial year. For example, the subsidy values for 2014–15 are based on the average house price determined on 1 July 2014.

How do I accrue service credit?

Permanent Members

If you’re a permanent member, after the minimum four year qualifying period, you start accruing a minimum service credit after a month of service.

For every month, you will accrue one month of entitlement to the scheme, or a year for every calendar year you serve. The maximum is 20 years in regular circumstances or 25 years if you served during wartime.

A maximum of 48 months service credits may be exchanged for a lump sum at the tier 1 level.

Reserve Members

If you’re a Reserve member, each year of service represents 20 days of paid service during one financial year.

At the end of the minimum eight year qualifying period, you will accrue one year of subsidy entitlement for every financial year during which you complete 20 days of service.

Reservists have the option of shortening the qualifying period by serving full-time for more than a continuous six month period during one financial year. This is equivalent to two years out of your eight year qualifying period. The continuous full-time service allowance isn’t applicable once the qualifying period has been completed.

How do I apply for the DHOAS subsidy?

  • Qualify and accrue service credit
  • Apply for a Subsidy Certificate (including a lump sum request – max 48 months) and supply service records as evidence. This certificate takes about five business days to process.
  • Provide your Subsidy Certificate to us so we can provide it to the lender.
  • After your home loan is settled and drawn, the lender will advise the Defence Force of the home loan balance and you’ll need to submit a Subsidy Authorisation Request Form (SARF) to the DHOAS, which you can find on the DHOAS website. You must be occupying the home and meet other condition in order to receive subsidy.
  • The DHOAS will then calculate your subsidy and lump sum payments if applicable, and you will then receive a letter with the payment details.
  • You will then start receiving the subsidy amount directly into your home loan each month.
  • For construction loans, submit a new subsidy certificate to your lender for each progressive drawdown to access higher subsidy (complete a DHOAS Change of Circumstances form) or wait until a later drawdown or until construction is complete.

We’re experts in defence force home loans and can provide essential tips on applying for the DHOAS scheme so please fill in our free assessment form or call one of our brokers on 1300 889 743.

Avoid having your subsidies cancelled

You’re required to notify DHOAS of any change in circumstances to your home loan, property, service status or partnership (if it’s a share loan).

Your subsidies could be cancelled in one of the following circumstances:

  • You close your home loan to take out another DHOAS home loan.
  • You repay your loan.
  • You increase your existing home loan.
  • You refinance your existing DHOAS home loan to renovate, expand or do other work on your home.
  • You and your partner separate (and your partner is a party to the DHOAS home loan and/or has an interest in the property).
  • You want to keep your current home loan open but want to transfer your subsidy to another DHOAS home loan.
  • You’re no longer able to meet the conditions of the ccheme.
  • You expend your DHOAS service credit.

To stay up to date with these rules, please refer to the DHOAS website.

Which banks offer this subsidy?

Any bank in Australia can submit a tender to the government to secure the contract for the defence housing discounts.

This contract is currently held by three home loan providers so your loan must be with them to receive this discount.

That being said, you may decide that another lender better suits your needs for a variety of reasons.

Our senior mortgage brokers will fully assess your situation and ask you what you want to achieve with your home loan so they can find you an option that best suits your needs. Call us on 1300 889 743 today.

Why won’t the bank accept my allowances?

Most banks are conservative when it comes to the monthly rental allowance you receive from the Defence Housing Australia (DHA).

The reason is that banks find it confusing that you receive this monthly allowance yet receive your paycheck on a fortnightly basis. Rather than trying to understand how it works, most simply won’t include it when assessing your income.

This can significantly affect your borrowing power. Luckily, we know lenders that will accept these accommodation allowances as well as other ADF subsidies:

  • Defence Service Accommodation subsidies: If you are living on an army base, you might be receiving a subsidy to live in Defence Housing Authority lodgings.
  • Private rental allowance: If you are living in accommodation you rented privately, you might be receiving a rental allowance to cover the cost of your lodgings, in part or in full. Some banks will accept this.
  • Uniform allowance: Permanent allowances such as Service and Uniform allowances.
  • Pension: Superannuation pensions from the Defence Force Retirement and Death Benefits Scheme (DFRDB), Commonwealth Superannuation Corporation (CSC) or the Department of Veterans’ Affairs (DVA) may be considered.

Some lenders may also add back the following deductions to your assessable income, further improving your borrowing power:

  • Military Superannuation Benefit (your 5% contributions can be added back).
  • Married quarter Rent.
  • Higher Education Loan Program (HELP) payments.
  • Living in Accommodation Charges (defence personnel who live on base in barracks pay this charge).

What about lump sum payments?

Not all lenders are willing to consider any lump sum payments you may receive from combat overseas when determining the maximum loan amount you are eligible for.

Bonuses will be accepted depending on whether or not it’s a regular payment.

By choosing the right lenders, you may be able to borrow between 90% to 95% of the property value. Discover if you qualify by checking out our Military Home Loan page.

Will house price changes affect my ongoing subsidy?

No. Although the annual review of Australia’s average home price affects the maximum monthly subsidy, those who already receive subsidies will be unaffected.

DHOAS vs non-DHOAS home loan

Dave and Mavias want to purchase their own home.

Dave has been working as a military pilot for 15 years and has heard about DHOAS mortgage subsidies for ADF personnel.

Based on his experience, he’s eligible for a Tier 3 subsidy.

However, he finds that he can get a much cheaper rate with another lender than the rate offered by Australian Military Bank.

Dave wants to work out if he’s better off going with a DHOAS home loan or to get the cheaper rate with the major lender.

DHOAS home loan

Loan amount: $550,000 Interest rate: 3.97% Term: 30 years Repayment: $2617 per month DHOAS subsidy: $437 per month Actual cost: $2617 – $437 = $2180

Non-DHOAS home loan

Loan amount: $550,000 Interest rate: 3.85% Term: 30 years Repayment: $2579/month DHOAS subsidy: $0 Actual cost: $2579

What is the HPAS scheme?

The Home Purchase Assistance Scheme (HPAS) is a little different to the DHOAS in that it helps ADF members pay the costs of taking out a home loan, including the application process, stamp duty and conveyancing costs. It’s a one-off lump sum payment that’s taxable.

Similar to this scheme is the Home Purchase or Sale Expenses Allowance (HPSEA).

Please check the ADF website to find out if you’re eligible for both schemes.

Apply for a defence force home loan today

Get rewarded for your service by saving thousands over the life of your mortgage!

Call 1300 889 743 or complete our free assessment form today and one of our senior mortgage brokers can tell you if you qualify for these exclusive ADF home loan subsidies.