IBA loan Guide

Indigenous Business Australia is committed to bringing financial independence to Aboriginals and Torres Strait Islander pe

Indigenous Business Australia is committed to bringing financial independence to Aboriginals and Torres Strait Islander peoples across the country.

IBA aims to bring the financial opportunities to these groups that are available to the rest of the Australian population.

IBA offers financial assistance and loans that other institutions do not offer. Through their flexible loan offerings, IBA provides indigenous Australians with the opportunity to enter the housing market without relying on loans from major lending institutions.

IBA began as the Aboriginal and Torres Strait Islander Commercial Development Corporation (CDC) in 1990 as a result of the Aboriginal and Torres Strait Islander Commission (ATSIC) Act.

From the beginning, IBA was established to protect the economic interest of Aboriginal and Torres Strait Islander peoples.

Through time and policy change, IBA eventually became the leading lending organisation to help indigenous Australians flourish in the public market.

The loan options through IBA are relatively limited. For instance, IBA doesn’t offer any fixed-rate loan options. Still, there is a small variety of loan options available through IBA. We take a closer look at each product in our “Loan Types” section below.

  • First Home Buyer (3 different options based on household income)
  • Previous Home Owner
  • Purchase of Residential Land
  • Construction Loan
  • Property Settlement
  • Home Improvements

IBA doesn’t provide many of the common features that other lenders offer, such as offset accounts and redraw facilities. Instead, IBA presents loan packages that cater to those with financial difficulty.

Low Deposit Requirements

One of the reasons borrowers choose IBA as a lender is because other financial institutions turned them down. IBA is much more generous with their lending opportunities, which gives Indigenous borrowers access to a wider range of financial assistance.

The biggest benefit to taking out a loan through IBA is the low deposit requirement, especially for first-time buyers. You will still need to save money for a deposit, but not near as much as you would with other lending institutions.

On top of that, IBA doesn’t require that you take out lenders mortgage insurance on low deposit loans. Most other banks require this insurance on low deposit loans to hedge their risk of the borrower failing to repay.

Introductory Interest Rates

IBA provides first-time borrowers with low introductory interest rates that match their income. These low rates allow some families to enter the housing market much sooner than they would otherwise be able to.

For instance, couples with a combined income of $42,429 a year and lower receive a 1% interest rate for the first 24 months of the loan. After that, the interest rises at an incremental rate each year.

Below is a breakdown of how IBA calculates and increases first-time introductory rates.

The loan products through IBA are relatively straightforward. These packages don’t have too many specific restrictions, but rather different uses that cater to borrower needs.

First Home Buyer

The First Home Buyer loan is, as the name suggests, for those who are purchasing a home for the first time. The loan is variable rate, as all loans through IBA are, but this one comes with three different tiers depending on your income.

IBA offers the First Home Buyer loans to borrowers who make a combined income of $43,290, between $43,290 and $73,593, and between $73,594 and $121,212. This is important to note because your income level affects your interest rate.

IBA offers financial assistance to borrowers in the way of interest rate relief. They adjust your interest rate to your income at the start of your loan to make sure you can keep up with the monthly payments.

IBA gradually increases your interest rate until it reaches market level but offers the opportunity for many buyers to get in the door before they otherwise would have been able to.

Previous Home Owner

The Previous Home Owner product is similar to the First Home Buyer without tiered income requirements. You can apply for this loan as long as you and your partner have a combined income of less than $121,212 a year.

IBA aims this package towards borrowers who have previously owned a home but may have been forced to sell. Like all loan types through IBA, the Previous Home Owner loan is variable rate.

Purchase of Residential Land

IBA also offers loans for those who want to purchase a plot of land where they plan on building a home in the future.

You must build the home within a specified time frame to meet the loan requirements.

Construction Loan

IBA also allows borrowers to use their funds for the construction of a new property on a plot of land. These loans work the same as a construction loan from other major financial institutions. IBA releases funds in stages, with progress and valuation landmarks along the way.

The conditions for these construction loans are that you need to use a licensed builder and receive a fixed-price contract. You cannot complete construction as an owner-builder with a loan from IBA.

Property Settlement

IBA offers the Property Settlement loan to one party who plans on staying in the home while the other leaves. This loan type commonly arises out of relationship breakups, where one person wants to stay in the house that both parties own together.

The Property Settlement loan allows borrowers to buy the other party out, so they don’t have to sell the home when they split.

Home Improvements

You can’t use the IBA Home Improvement loan for cosmetic or vanity upgrades, but you can use this loan to make necessary improvements when your financial situation is dire.

IBA lists the following examples of when they offer home improvement loans to borrowers:

  • To accommodate changes in the number of family members
  • For medical or health-related reasons
  • To help a family cope with local environmental conditions such as heat or cold
  • To repair or replace worn out or obsolete items of domestic infrastructure
  • To prevent harm or danger to the family members

The first step in applying for a loan through IBA is filling out an expression of interest form. You will provide IBA with personal and financial information and identify which loan you feel best fits your needs.

From there, IBA will review your details and assess your eligibility. If you are eligible, IBA will invite you to apply for an IBA housing loan. IBA uses the additional information from the application form to formally evaluate whether or not you will qualify for the loan amount you’ve requested.

In some cases, IBA won’t be able to fund the entirety of your desired amount. If this happens, you’ll have to borrow the rest of the funds through a traditional lending institution.
You can use our comparison tool to help find low rates from other lenders if IBA can’t provide the whole amount of your loan.

IBA designed their loan products to give Indigenous Australians access to home loans that otherwise wouldn’t be available. In many cases, traditional lending institutions – such as banks and credit unions – may have already turned the borrower down for a loan.

IBA’s financial assistance and flexible loan terms mean that the loans tend to be fairly basic. Other banks have the resources to offer a long list of features where IBA does not. This means that IBA does not provide redraw facilities to borrowers.

Borrowing from IBA usually means your borrowing power is limited, so the loan is an opportunity to get your foot in the door.

After a few years of paying your loan through IBA, you may be able to refinance and get a new loan from a bank or credit union with more features, such as redraw facilities.

Yes, you can make additional repayments on your loan through IBA. In fact, IBA encourages you to make additional repayments on your loan so you can pay it off faster.

IBA loan products offer monthly or fortnightly repayments. They also give you a complete breakdown of how much money you’ll save by making additional repayments every month.

IBA’s extra repayment structure and transparency is another example of how the organisation works to support borrowers throughout their home loan journey.

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