Split Loan for Lenders
Split Loan for Lenders
Indigenous Business Australia (IBA) provides a range of housing loan products, to enable eligible Indigenous Australians to purchase their first home (in most cases). IBA’s lending products are targeted to customers who, due to low incomes or limited savings, would otherwise be unable to obtain finance from a commercial lender.
The amount of loan funds an IBA customer is able to borrow is based on their income and capacity to repay the loan, and location purchase price limits. Where circumstances allow, IBA requires the customer to obtain some of their loan funds from a commercial lender. In these situations, IBA’s Split Loan can be applied to meet the gap between the amount that the customer is able to borrow from the commercial lender and the purchase price.
Information for lenders
Who is Indigenous Business Australia?
Why does IBA offer concessional housing loans to Indigenous Australians?
What interest rate is applicable to an IBA Split Loan?
How much can a customer borrow using an IBA Split Loan?
Is it possible for a commercial lender to meet a greater proportion of the loan funding requirements than what is detailed in the Preliminary Assessment Letter?
How can IBA offer housing loans at concessional interest rates?
How does IBA manage the security risk?
Why is IBA offering Split Loans?
What additional benefits do Split Loans offer to commercial lenders and customers?
Will IBA provide aftercare support to Split Loan customers?
Who applies for the First Home Owner Grant?
How does the relationship between the mortgagees work?
For more information
Who is Indigenous Business Australia?
IBA is a statutory authority of the Australian Government which provides opportunities for Aboriginal and Torres Strait Islander individuals and communities to build assets and wealth. More than 14,000 Indigenous individuals and families have been assisted into home ownership through its Home Ownership Program since 1975.
Why does IBA offer concessional housing loans to Indigenous Australians?
In Australia, home ownership provides a foothold for economic participation in the broader economy. IBA home loans provide an entry point into home ownership for Indigenous Australians and the opportunity to build wealth and economic independence.
What is an IBA Split Loan?
IBA’s Split Loan is a loan offered to IBA customers who can obtain some of the loan funds required to complete a home purchase from a commercial lender. The IBA Split Loan meets the gap between the amount that the customer is able to borrow from the commercial lender and the purchase price.
The commercial lender’s loan will be secured by a first mortgage and IBA’s loan will be secured by a second mortgage. As a minimum, the IBA Split Loan should cover the deposit requirements of the first mortgagee and there should be no requirement for the customer to take out mortgage insurance.
What interest rate is applicable to an IBA Split Loan?
IBA’s Split Loans commence at a concessional interest rate of 4 per cent per annum* for the first three calendar years which thereafter will increase by 0.5 per cent on 1 January each year until it reaches the standard IBA Home Loan Rate**.The following table provides an example of the changes in IBA’s Split Loan interest rates:
| Date and event | Interest rate |
| 15 November 2010 – IBA Split Loan advanced | 4.00% p.a. fixed* |
| 1 January 2014 – interest rate increases by 0.5% after 3 calendar years | 4.50% p.a. variable |
| 1 January 2015 – interest rate increases by 0.5% | 5.00% p.a. variable |
| 1 January 2016 – IBA Home Loan rate reached | 5.25% p.a. variable** |
(Please note: * This rate is effective from 1 July 2009 and is subject to change. ** The IBA Home Loan Rate as at 19 December 2011 is 5.25 per cent per annum and is subject to change.)
How much can a customer borrow using an IBA Split Loan?
IBA will assess how much it is prepared to lend the customer and how much they are required to source from a commercial lender. The customer should provide you with a copy of the Preliminary Assessment Letter which details this information.
Is it possible for a commercial lender to meet a greater proportion of the loan funding requirements than what is detailed in the Preliminary Assessment Letter?
Yes. The loan amounts in the Preliminary Assessment Letter are based on broad assumptions about how much a customer should obtain from a commercial lender and are subject to IBA’s overall affordability assessment. In all cases, the customer is required to obtain as much of the funding for the purchase of the home from the commercial lender, subject to the overall affordability of the proposal and without requiring mortgage insurance.
How can IBA offer housing loans at concessional interest rates?
IBA is able to provide loans at concessional interest rates to eligible customers because its new lending is funded by reinvestment of existing loan repayments and occasional capital injections by Government, not from borrowed funding.
How does IBA manage the security risk?
IBA‘s Split Loan is secured by a second mortgage position. IBA makes prudent financial lending decisions when considering loan applications. IBA assess the loan applicant’s capacity to pay, good character, collateral and capital / assets.
Why is IBA offering Split Loans?
IBA has limited funds and has a long waiting list of eligible applicants seeking home loans. The Split Loan product enables IBA to assist a greater number of customers. Additionally, IBA is keen to work closely with the private sector and local community groups to build economic independence and home ownership among Indigenous Australians.
What additional benefits do Split Loans offer to commercial lenders and customers?
IBA housing loans are a basic ‘no frills’ product designed to enable Indigenous Australians to buy, in most cases, their first home. Commercial lenders are in a position to offer IBA customers other financial products depending on their circumstances (for example, access to redraw facilities, offset accounts and home insurance products).
Will IBA provide aftercare support to Split Loan customers?
Yes. IBA will provide appropriate aftercare support to its customers who enter into a Split Loan with another commercial lender.
Who applies for the First Home Owner Grant?
IBA will apply for the First Home Owner Grant on its customer’s behalf.
How does the relationship between the mortgagees work?
IBA will be the second mortgagee in a Split Loan arrangement. This involves entering into a deed of priority agreement which governs the roles and working relationship between the two lenders and the agreed priority to the secured property. IBA has already established acceptable priority agreements with a number of lenders.
For more information
If you have any questions regarding the Split Loan please Contact Us.