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Scholarship Income Home Loan

Can I qualify for a home loan with scholarship income?

Some of Australia’s best and brightest are unable to apply for a home loan because most major lenders will not include income from a scholarship when they assess their ability to repay a loan.

The result is that thousands of would-be home buyers are forced to wait until they finish university before buying their first home.

Thankfully not all banks have lending criteria excluding the use of income from a scholarship.

Usually, your scholarship income alone won’t be enough to qualify for a home loan but combined with your partner’s income, we may be able to get you approved.

How much can I borrow?

The amount you can borrow will depend on your situation:

  • Under 12 months remaining on scholarship: We may be able to help you borrow up to 80% of the property value, and possibly more on a case by case basis. Most lenders will not accept your income in their assessment.
  • >12 months remaining on scholarship: You can borrow up to 90% of the property value (95% for very strong applications).
  • >12 months remaining on scholarship with a guarantor loan: You can borrow up to 105% of the value of the property. This allows you to borrow the stamp duty as well (if not exempt in your state).

Please call us on 1300 889 743 or enquire online to discuss your situation with an expert mortgage broker who can help you get approved!

Which banks will accept my scholarship income?

Although most lenders will not accept income from a scholarship, one of our lenders can use this income in their serviceability assessment as long as the scholarship has at least 12 months remaining.

This is to be verified either from the initial letter from your university confirming that you have been awarded a scholarship, or from a letter from your university at the time of the loan application.

Again, the scholarship income alone may not be enough to service the home loan so your partner will need to be earning an income.

Which types of scholarships are included?

Most of our customers are PhD students on one of three types of scholarships / Fellowships:

  • Commonwealth scholarship: Government scholarships are generally paid as tax free income on an ongoing basis. One of our lenders can accept this income for a home loan.
  • University scholarship: University scholarships can be either paid as taxable income or tax free income on an ongoing basis. One of our lenders can accept this income for a home loan.
  • Fellowship: This income can be accepted on a case by case basis, depending on the nature of the payments and the likelihood that it is to continue.

Which scholarships are not included?

As a general rule only the actual income you received can be accepted by our lenders. Other benefits are not included in the lenders assessment.

The following are not acceptable income / benefits:

  • Merit based scholarships.
  • Direct payment of tuition.
  • Fee exempt scholarships.
  • HECS exemption.
  • Scholarships awarded as a prize.
  • Additional allowances (case by case, accepted if a government benefit).
  • Free accommodation.

If you receive any of these benefits then please be aware that lenders will not include this in their assessment. They will only accept the regular base income that you receive.

Some lenders may ring the provider of your scholarship to confirm the nature of the benefits that you receive.

What types of customers can we help?

Students with partners who work full-time

In most cases the partner has recently completed their university degree, has entered the workforce and may still be repaying their HECs debt.

We most commonly deal with researchers on a NHMRC scholarship or on a university-funded scholarship.

Students buying on their own

The other type of customer that we often assist is a university student who is buying on their own (i.e. not with a partner).

In most cases scholarship income is not enough on its own to support the home loan repayments.

For this reason these students either have a part time job / casual job that they work in or they receive help from their parents.

If you are in any of these situations please call us on 1300 889 743 or enquire online. There may be other ways that you can get a mortgage. Our expert brokers will help work out a solution for you.

How do lenders assess HECs debt?

The government requires you to repay your HECs debt at a particular rate depending on your current taxable income.

As many scholarships are tax free, and often the ones that are taxable are low enough that no HECs is repaid, in most cases the bank will ignore your HECs debt.

It is assumed that when you enter the workforce your income will rise and then you will begin to repay your HECs.

Overall you would be in a better position when this happens so the lender will not take your HECs debt into account.

Will some lenders include HECs debt?

If your partner has a HECs debt which is currently being deducted from their pay, then the lender will include the actual HECs deductions in their assessment.

What if I don’t have a deposit saved?

If you don’t have a deposit then you may want to consider asking your parents if they can help you apply for a guarantor home loan with a Security Guarantee.

If you do not have a deposit and cannot afford the repayments on your own then you will need your parents to guarantee your loan using a Security & Serviceability Guarantee.

Want help applying for a home loan? Speak to us today on 1300 889 743 or enquire online and our specialist mortgage brokers can assist you in the process and make sure you get the best rates around!

Get your home loan approved!

Do you need help with your home loan? Our mortgage brokers know the policies for each bank and know which can accept income from a scholarship.

We can quickly work out which lender would be most suitable for you, depending on the nature and duration of your scholarship and how best to present your application to the bank to ensure it gets approved.

Please call us on 1300 889 743 or enquire online and one of our brokers will ring you back to discuss your situation.

  • Lisa C.

    Hi, what are the main things that banks consider when they calculate the amount we customers can borrow when we buy a house?

  • Hello Lisa C.

    Customers are mainly assessed on two things – First, your income and expenses to see just how much you can actually afford, which is also known as serviceability. Second, your deposit and how it translates into the price of the purchase. You can find out more in the maximum purchase price page:
    https://www.homeloanexperts.com.au/how-much-can-i-borrow/maximum-purchasing-price-for-buying-a-home/

  • Mike

    Hi there,
    This is Mike. I’ve got full time job with 80K salary and my wife got PhD scholarship $25K per year tax free. We’ve got around $100K deposit. We are renting a unit with $2600 monthly payment.
    Is the any bank who can accept the scholarship? Could you please let me know how much roughly I can borrow.

  • G’day Mike,

    Yes this should be fine. Most lenders will not accept your wife’s income but we have a few that can as an exception. As she is not the main income earner, she could be expected to earn more when she finishes, you have a good deposit and a rental history we should have no problems.

    Our broker will need to know a few details:
    – How long the scholarship is for. i.e. time remaining on the scholarship
    – Who is providing the scholarship
    – Likely career when finishing.

    Please call us on 1300 889 743 if you’d like a full assessment.

    P.s. well done on marrying a very smart woman!

  • Tevin

    Hi there,
    This is Tevin. Both my partner and I are PhD students and we are looking into getting a property. We are both getting 50k pa. and tax free. He is an Australian citizen but I am not. I have also been working for the university as a casual employee for 3 years. Ideally I would like to get the property under my name only, but is it possible?
    Thanks,
    Tevin

  • Hi Tevin,
    It would depend on if you are a permanent resident or temporary resident. If you’re a PR then we could buy in your name only and have the loan in both names, using both of your incomes. If you’re a temporary resident then we’d need to buy the properties in both names to get approved, although we can seek an exception and argue the case for you to try to put it just in your name.

    We’d need to know a little more about the stability of your PhD scholarship income and also your casual income. However indicatively this is ok. The size of your deposit would matter as well. If you are borrowing 80% or less of the property value OR if your partner’s parents guaranteed your loan then very likely your loan would be approved.

    As this is more complex please write “refer to Otto” in your online enquiry and I’ll review your situation personally when our broker has all of your details. https://www.homeloanexperts.com.au/free-quote/