Broker guide
Defence Bank Home Loan Lending Policy 2026
Assess a Defence Bank home loan by checking membership, borrower evidence, deposit, property and lending rules separately from defence assistance.
- Published
- Updated
A Defence Bank home loan requires a residential credit assessment even when your client is a member or qualifies for defence housing assistance. Membership is open to all Australians. For a defence borrower, establish loan purpose and repayment capacity separately from Defence Home Ownership Assistance Scheme (DHOAS) eligibility.
Use the lender policy guides when the scenario requires a comparison with another lender.
Confirm Membership and Borrower Facts
Defence Bank membership doesn’t require a defence connection, according to its membership information as at October 2026. Record each applicant’s membership status and identity. For a defence-community borrower, also record whether they are serving, a reservist, a veteran or a partner.
Start the file with the requested loan amount and purpose. Distinguish buying an owner-occupied home, refinancing, construction and investment. Record who will own the property, who will borrow and who will live there, including any posting that changes the occupancy plan.
Defence Bank’s application guide dated 6 July 2021 remains a useful starting point for evidence. It asks for recent payslips and salary credits, an employment contract for a new role and current Centrelink payment evidence where relevant.
An income document proves what the client receives. The bank’s assessment determines how much it counts.
Use the bank’s documentation checklist dated 5 July 2021 to gather the following evidence.
| Assessment item | Evidence to prepare |
|---|---|
| Full-time or part-time employment | Two of the last three payslips with year-to-date income |
| Regular overtime or commission | Further payslips, an employer letter or an employment contract supporting base salary and the income history |
| Casual employment | Two recent payslips with year-to-date figures covering at least six months of continuous employment |
| Self-employed income | The last two years’ tax returns and notices of assessment |
| Rental income | A current rental statement or signed lease, plus three months of rental credits |
| Assets and debts | Current balances, repayments and evidence of assets outside Defence Bank |
| Household spending | Living expenses, dependants, housing costs, education, childcare and child support |
For defence income, distinguish base salary from each allowance and explain its duration. Record salary packaging and changes expected after a posting or discharge. Match debt balances and credit limits to statements before calculating serviceability, the bank’s test of repayment capacity.
Separate DHOAS From Lending Policy
The Department of Veterans’ Affairs (DVA) administers DHOAS for the Department of Defence. DVA determines the applicant’s scheme eligibility and entitlement. Defence Bank determines whether the home loan meets its lending criteria and how much the client can borrow.
As at October 2026, the official DHOAS eligibility guidance requires service on or after 1 July 2008 and a qualifying service period. The minimum is two consecutive years of Permanent Australian Defence Force (ADF) service or four years of effective Reserve service. Reserve service requires at least 20 paid days per financial year, and sufficient service credit must be accrued.
A service history alone doesn’t establish the final entitlement. The client applies to DVA for a subsidy certificate. The official DHOAS loan guidance expressly separates that certificate from loan approval: the lender still assesses the application under its lending criteria.
Defence Bank is a nominated DHOAS lender, as its DHOAS information confirms as at October 2026. Monthly subsidy payments go directly into the DHOAS home loan. The subsidy tier determines the eligible portion attracting assistance, which can differ from the total approved loan.
Keep the file’s decisions separate.
| File record | What it establishes | Decision owner |
|---|---|---|
| Subsidy certificate and service information | Scheme eligibility, entitlement and certificate details | DVA |
| Deposit and settlement funds | Money available when the transaction completes | Defence Bank’s lending assessment |
| Income and commitments | Repayment capacity and treatment of the subsidy in servicing | Defence Bank |
| Property and valuation | Acceptable security and the lending value | Defence Bank |
| Loan decision | Approved amount and outstanding conditions | Defence Bank |
The scheme’s occupancy conditions, as at October 2026, generally require the borrower or family to occupy the subsidised home for at least 12 months. An existing posting order requiring relocation within a year allows subsidy until the client vacates. They then fail the 12-month condition.
A posting received after occupation in good faith can qualify for a reduced occupancy requirement. Notify DVA before moving and attach the posting order. The DHOAS applicant must be on title and hold at least a 50% property interest alone or with their partner.
For broader assistance options, use the defence home loans guide. Here, the subsidy remains a separate entitlement record and doesn’t replace deposit evidence or credit approval.
Check Deposit and Security
Calculate funds to complete from the purchase price, transaction costs and available money, then calculate the loan-to-value ratio (LVR) using the bank’s accepted property value. LVR is the loan amount divided by the property value, expressed as a percentage.
Defence Bank’s Premier Home Loan Owner Occupied determination dated 1 October 2025 states lending up to 95% of property value. Its 98% provision requires a government guarantee under the Australian Government 5% Deposit Scheme’s single-parent pathway. Lenders mortgage insurance (LMI) applies above 80% unless that scheme guarantees the loan.
The Premier product has variable rates and principal-and-interest repayments, with a term up to 30 years. It covers purchasing or refinancing an owner-occupied home. For DHOAS lending, that determination requires a registered first mortgage.
For construction or a different repayment structure, assess the appropriate product. Defence Bank’s Ultimate Essentials Owner Occupied determination dated 19 February 2026 includes purchase, construction, renovation and refinancing. It has fixed, variable and split options.
Ultimate Essentials lists interest-only periods of one to five years, capped at ten years over the loan’s life. Construction interest-only lasts up to 12 months before principal-and-interest repayments. A product repayment option still needs to meet the DHOAS conditions if subsidy is sought.
Prepare a funds-to-complete schedule with each source shown separately.
- Savings: identify the account holder and support the balance and accumulation with statements.
- Gifts or sale proceeds: show the source, amount and date the money becomes available.
- Existing equity: show the property value and secured debt, then identify how funds will be released.
- Grants or other assistance: retain the eligibility decision and payment timing. Count only money available for the transaction.
- Allow for conveyancing and government charges. Add lender costs and LMI where applicable.
DHOAS monthly subsidy isn’t cash held for settlement. A separate assistance payment needs evidence of its amount and availability before it enters the deposit calculation. The minimum deposit guide explains the wider funds-to-complete calculation.
Worked Example: Deposit and Subsidy Kept Separate
In this hypothetical purchase, the price and accepted valuation are both $600,000. The requested loan is $540,000, giving an LVR of 90%. The client needs $60,000 towards the price, plus transaction costs and any applicable LMI amount.
A DHOAS certificate stays in the entitlement record. Future monthly subsidy doesn’t fill a shortfall in the $60,000. If the valuation falls below the purchase price, recalculate the LVR and available loan before treating the settlement funding as complete.
Record the property’s address, postcode, type, land area and title details. Match the contract price to the valuation and describe unusual features or intended use. For construction, include the fixed-price builder’s contract and approved plans in the bank’s evidence pack.
Prepare the Policy Escalation
Send a specific scenario question to a Defence Bank home loan consultant or mobile lender, with the facts that decide the exception. As at October 2026, Defence Bank’s lender directory lists these contacts by state or territory. You can also call 1800 033 139 to reach the bank.
Ask the lending specialist to identify the assessment route for the proposed exception. Describe the exact policy issue, such as a temporary allowance, unusual security or requested repayment structure. Obtain the document requirements and any conditions in writing, then keep that response with the file.
Prepare the escalation in this order.
- Identify the applicants, membership status, employment and household commitments.
- State the purpose, loan amount, deposit sources, valuation and LVR. Include the property location, type and proposed repayment structure.
- Describe the income component or security feature requiring consideration, with evidence and any expected changes.
- Attach the relevant lender document and isolate the question the standard terms don’t resolve for this client.
- Record the DHOAS certificate and occupancy facts separately. Direct entitlement or posting-related scheme questions to DVA on 1300 434 627.
- Retain the bank’s written response, its date, conditions and outstanding documents. Distinguish a scenario response from formal loan approval.
The final file needs a traceable source for each decision: lender evidence for credit and security, DVA evidence for entitlement and documents for settlement funds. Proceed on the bank’s recorded lending conditions and the scheme’s recorded assistance conditions, with each attached to the decision it supports.
