The Defence Home Ownership Assistance Scheme (DHOAS) helps Australian Defence Force (ADF) members buy a home. The scheme was established to acknowledge the commitment and sacrifices of service members by making it easier for them to access homeownership via a home loan subsidy.
The legislative framework for DHOAS falls under the Defence Home Ownership Assistance Scheme Regulations 2018 and the Defence Home Ownership Assistance Scheme Act 2008. This article offers an in-depth explanation of how DHOAS works for ADF members.
Who is DHOAS for, and how does it work?
DHOAS is available for current and former ADF members and is administered by the Department of Veterans’ Affairs.
Subsidy payments are made monthly and directly applied to a DHOAS home loan account. A member’s subsidy amount is determined by their allocated subsidy tier level and the current balance of their home loan, subject to the maximum subsidised loan limit.
Members continue to receive subsidy payments if they have service credit, a DHOAS home loan, and meet the scheme’s outlined conditions.
How much are subsidy payments, and how long do they last?
DHOAS subsidy payments are typically 37.5% of the median interest expense of the subsidised amount of your home loan over 25 years. A median interest rate across aggregated Australian home loans is used to calculate the interest charged on all DHOAS home loans, not your actual home loan interest rate.
The subsidised loan limit may be less than your actual home loan. This means that the subsidy payment is only made on the subsidised portion of the loan.
Your DHOAS Tier (explained further below) limits the subsidy portion of your loan. DHOAS sets the tier limits and reviews them periodically.
For example, in July 2023, a member with a tier 1 limit had a subsidised loan limit of $364,916 and a subsidy payment of $510.
DHOAS subsidy payments last as long as you have service credit (explained further on) and maintain eligibility requirements.
DHOAS eligibility criteria
To be eligible for DHOAS, members must have served on or after 1 July 2008 and finished a qualifying service period. This qualifying period is at least two years of consecutive Permanent ADF service. Alternatively, it could be effective Reserve service of at least 20 paid days each financial year for at least four years.
Members should also complete enough effective service to gain a service credit. A member accrues DHOAS service credit after completing effective service for the ADF. You start accruing this credit after you complete the qualifying period of service. Members can accrue service credit to a limit of 20 years. For warlike service, this limit is up to 25 years.
The scheme outlines how service milestones influence subsidy tiers, accommodating circumstances such as separation and medical discharge. The impact of reserve service and exemptions from effective service are also considered.
Qualifying period
Members must complete a qualifying period of service to start gaining service credit and become eligible for DHOAS. Different requirements are outlined for Reserves and Permanent Force members, along with foreign services lateral recruits.
Permanent members’ qualifying period
- Two years of consecutive service.
- If you have taken less than 12 consecutive months of leave without pay, it can be used without affecting service continuity. However, this will pause your credit for the qualifying period, which will resume when you commence paid service again.
- Warlike service does not speed up the two-year qualifying period.
Remember that continuity of service ceases if you leave the ADF and then re-enlist. In this case, you will restart the qualifying period from the re-enlist date.
Reserve members’ qualifying period
- Effective Reserve service for four consecutive financial years.
- Completing a minimum of 20 days of paid service in a financial year.
- Warlike service does not speed up the four-year qualifying period.
Please note that continuity of service is stopped if the 20-day paid service criteria are not completed in the financial year. If this is stopped, a member must restart their qualifying period from the financial year they start effective service again.
When can you receive DHOAS?
ADF members can start receiving DHOAS subsidy payments once they have completed their qualifying period of service. Additionally, they must take out a DHOAS home loan with one of the three approved lenders, purchase an eligible home, and occupy the home as their principal residence within six months of the loan settlement.
ADF members must apply for and be issued a DHOAS subsidy certificate confirming their eligibility. They must also maintain their ADF service conditions to continue receiving the subsidy payments.
Types of properties that can be purchased
Under DHOAS, eligible ADF members can purchase various types of properties. These include established homes, new homes, off-the-plan properties where the contract is signed before the building is completed, and home and land packages.
DHOAS home loans can only be used for buying, building, renovating or extending a home. Refinancing a loan for any of these purposes will also qualify for DHOAS.
Which lenders provide DHOAS home loans?
Defence has appointed three home loan providers to offer DHOAS-approved loans exclusively.
Each bank has developed home loan products aligned with the scheme’s arrangements.
Once members have their subsidy certificate, they can explore options with these approved home loan providers. As DHOAS covers different loan types, it is important to understand what is right for you. A financial advisor for veterans can help you better understand your situation in relation to a DHOAS loan and the other options available.
Types of loans that can be accessed under DHOAS
DHOAS loans aren’t limited to home loans for existing properties. Under DHOAS, ADF members and veterans can access a range of mortgage products.
Standard home loans
If you’re buying an existing residential property and need finance, a DHOAS loan can help make this possible. DHOAS provides subsidy payments for your loan and can make home ownership more accessible and affordable. With a standard DHOAS loan, members have lower monthly payments and can choose from different types of housing that meet the eligibility criteria. This may be an existing house, townhouse or apartment.
Construction loans
If you want to build a house, you can get a DHOAS subsidy for your construction loan. Usually, these types of loans revolve around several milestones until the building process is completed. You have two options. You can commence subsidy payments while your home is being built. Alternatively, you can postpone payments until the loan balance becomes higher after further drawdowns or once construction is completed and the loan is fully drawn down.
If you’re considering using DHOAS for a construction loan, it may be worth speaking to an experienced veteran financial advisor. They can help you maximise the subsidy benefits.
Multi-party loans
Multi-party loans allow more than one applicant, typically partners or spouses, to apply for a loan to purchase a home together with the ADF member. This approach helps applicants access a larger pool of financial resources, potentially qualifying them for a larger loan amount or more favourable loan terms than an individual might receive alone. You can take out a home loan with multiple parties or another party, as long as you and your partner or you alone have an interest in the property of 50% or more. The DHOAS applicant must also be on the title. The subsidy may be reduced proportionately if you have a non-partner as a co-borrower.
Getting approved for a home loan
To get a home loan through DHOAS, members must apply to an approved DHOAS loan provider, accompanied by a valid DHOAS subsidy certificate. The nominated provider will then conduct a loan assessment of your home loan request, based on their lending criteria.
Eligibility for DHOAS does not guarantee approval of your home loan application. The loan provider retains the discretion to approve or decline your application for a home loan, regardless of your DHOAS eligibility status or subsidy tier level.
DHOAS subsidy tiers
The subsidy framework is structured across three tiers based on longevity in service. A member who has served longer will enjoy a higher tier level, which will also mean a higher corresponding subsidised loan limit. This means a higher home loan amount will be subsidised, so you will receive more payments as a monthly subsidy.
The table below details the subsidy tiers:
| Subsidy Tier | Minimum Permanent Service | Minimum Reserve Service |
| 1 | 2 | 4 |
| 2 | 4 | 8 |
| 3 | 8 | 12 |
Members who hit specific service milestones achieve a higher subsidy tier, resulting in higher benefits. For example, if a member serves for 8 years or more of continuous permanent service, they will fall into tier 3 and receive the maximum subsidy benefit.
How does your Service Credit work for DHOAS?
Service Credit is a crucial aspect of DHOAS, directly influencing how long you can receive subsidy payments. You can only receive DHOAS payments while you have a service credit.
Permanent ADF members accrue one month of service credit for every month of effective service completed after the qualifying period. Reserve members accrue one year of service credit for every financial year they complete at least 20 days of paid service.
Warlike service allows members to gain additional service credit. Members who complete warlike service gain:
- 2 years credit for a period of warlike service not exceeding 3 months
- 3 years credit for a period of warlike service between 3 and 6 months
- 4 years credit for a period of warlike service between 6 and 9 months
- 5 years credit for a period of warlike service greater than 9 months
Your service credit is calculated as:
- Your total years of ADF service
- Additional years gained from completing warlike service
minus:
- the qualifying period
- any period of time you have already accessed DHOAS or subsidies from older schemes, such as the Defence Service Homes or the Defence HomeOwner Scheme
- Breaks in service after finishing your qualifying period
- Any years of ADF service that aren’t recognised due to rejoining provisions
Service Credit is calculated monthly, and your entitlement grows incrementally over time. It accrues after a member completes their qualifying period. It reviews the years of effective service, plus additional years in a participating foreign service. Members accrue a maximum service credit of 20 years for standard service and 25 years for wartime service.
What is the maximum loan amount?
DHOAS sets and updates the maximum loan amount periodically. As of May 2024, for tier 3, the maximum subsidised loan amount is $729,831. Members receive a monthly subsidy of up to $1,064.
Application for a subsidy certificate
Securing a subsidy certificate is an essential step in the process. Applicants must provide their service records and complete an application confirming their eligibility using the DHOAS Subsidy Authorisation Request Form (SARF), which can be done online or manually.
This step also touches on situations where reassessment or reapplication might be necessary, ensuring members are well-informed of their standing within the scheme. Ultimately, it ensures that all prerequisites are met to acquire a DHOAS-supported home loan.
Eligibility alone does not guarantee the subsidy’s receipt. Members must meet the conditions outlined in the subsidy request form and maintain eligibility and compliance.
When is DHOAS no longer payable?
DHOAS payments cease when a member’s service credit is depleted, they no longer meet eligibility requirements, or if they pay off their home loan in full.
DHOAS payments can still be received if you leave the ADF; however, note that your service credit will start to deplete without ongoing ADF service. For this reason, it is important to have financial considerations if you are leaving the ADF.
Occupancy requirements
DHOAS is intended to help serving and former ADF members achieve home ownership, so DHOAS payments are only provided while members and/or their families occupy the home for at least 12 months.
Unless you need to vacate your home due to situations beyond your control, moving away from your home before 12 months of occupancy will result in subsidy payments ceasing.
Once 12 months have passed, you can continue to receive subsidy payments into your DHOAS loan, regardless of whether or not you live in the house. This means the property can be rented out. However, it’s important to seek tax advice about the effects of receiving DHOAS subsidy payments in this case.
DHOAS advantages
The primary benefit of DHOAS is the provision of a subsidy that reduces the interest payable on a home loan, which can lead to significant savings. It is also inclusive and available to serving members, reservists, and veterans, providing a wide-reaching support network for the ADF community. The scheme allows members to select a DHOAS-approved loan that best suits their needs. It also supports different housing purchases, including existing homes, new home builds, or off-the-plan to meet different needs.
DHOAS disadvantages
Although a DHOAS loan can provide savings for a member or veteran’s mortgage, there are other considerations. As only three lenders are authorised to provide DHOAS loans, there may be some personal circumstances where a DHOAS-approved lender may be unable to offer a home loan, whereas another lender may. Furthermore, some lenders may provide a lower interest rate than a DHOAS-approved lender.
Members must also meet several rules and conditions to maintain the subsidy payments. Some members and veterans may find these conditions difficult to meet or that they don’t match other investment goals they might have.
Speaking to a veteran financial advisor licensed to provide debt management advice can help you decide if DHOAS is right for you.
Meeting your DHOAS subsidy obligations
Staying compliant with DHOAS requires prompt reporting of any circumstance changes that could affect subsidy eligibility or amounts, such as a new posting, change in relationship status and separation from the ADF. Recognising and communicating these events ensures the integrity of the scheme and its adaptability to members’ evolving circumstances.
Understanding the timing and variability of subsidy payments is crucial for budget planning. Members should be aware of the circumstances that can arise, such as financial challenges and how this could affect their subsidy. They should also understand how the end of service or loan closure impacts the disbursement of funds.
Is a DHOAS loan the right choice for you?
DHOAS helps ADF members and veterans achieve homeownership; however, it is subject to eligibility criteria and conditions.
While there are potential benefits, there may be other alternatives to DHOAS loans that offer lower repayments over the life of a loan.
ADF members may also consider standard home loans, which offer more flexibility in competitive interest rates, loan structuring, refinancing, and a wider choice of lenders. The competitive nature of the standard home loan market means that borrowers may have access to lower interest rates and fees as financial institutions vie for their business. This can lead to savings over the life of the loan, making it an attractive option in some cases.
You will also need to consider postings and relocations to decide whether buying a home is right for you and your family.
Given the complexity of DHOAS, it is valuable to consult with an experienced financial adviser who understands DHOAS entitlements, such as National Service Financial. We can help you better understand whether it is the right choice based on your eligibility, current financial situation and future objectives. We can help you understand more about defence home loans and will guide you through all your options (including other major bank lenders) so you can make the most informed decision. We are dedicated to helping ADF personnel become more financially educated.