How the scheme works
Important - A home loan with the National Australia Bank (NAB) will not be a Defence HomeOwner loan until you have been issued with an Entitlement Certificate, and an Application for Payment of Subsidy has been approved by the Department of Veterans' Affairs (DVA).
Entitled members arrange a home loan through the National Australia Bank (NAB) and, if eligible, a monthly subsidy will be paid directly to the loan account by the DVA.
The subsidy will be paid for the period of a member's entitlement or until the loan has been discharged, transferred or repaid.
The entitlement period will be reduced by one month for every subsidy paid, and will be increased by 12 months on the anniversary of enlistment, or end of effective service year, if still serving. (A delayed enlistment date is calculated for members with periods of non-effective service over 21 consecutive days).
After the loan has commenced, the only change to the amount of subsidy will be after a change in the scheme's Variable Interest Rate.
Loan repayments
Loan repayments start on the last business day of the month following settlement and continue monthly on the last business day. The subsidy will be deposited to the loan account on this day.
Repayments may be made fortnightly, but please ensure you deposit a sufficient amount to cover your monthly obligation.
Higher repayments and lump sum payments may be made without penalty, however, be mindful that there are presently no redraw facilities.
When your entitlement to DHOS is expended, the repayments on your DHOS home loan will revert to NAB's normal variable rate.
The loan repayment period may be reduced to the amount of time you feel comfortable with repayments. If the loan repayment period is reduced, the amount of the monthly subsidy will remain unchanged as it is calculated using the 25 year repayment period.
Loan amount
Any amount may be borrowed subject to the NAB's normal lending conditions. However, the subsidy will only be calculated on the maximum of $80,000. Any amount over that will be treated as a 'top-up' loan.
Presently, the Defence HomeOwner Scheme loan must be established as a basic home loan, which unfortunately does not allow for extra facilities, such as redraws.
For loan fee purposes, the NAB will treat the Defence HomeOwner loan/s and 'top-up' loan as one loan. If the full $80,000 is not used, the outstanding amount can be used for renovations or repairs at a later date if the member remains eligible (see Loan Increases). The original principal loan amount, or that figure plus any approved increases, is used for calculating the subsidy, irrespective of your loan repayments.
DHOS Benchmark Interest Rate
The interest rate that applies to the DHOS home loan is called the 'Benchmark Interest Rate'.
DVA calculates the benchmark rate for DHOS home loans monthly.
Using data provided by the Reserve Bank of Australia (RBA) at the end of the month, DVA averages the variable rates of the five largest lenders, and then compares that average against the NAB variable rate.
The benchmark rate for DHOS will be the lower of the two.
If the benchmark rate changes so, too, will the amount of subsidy you receive.
Timing of rate change
The RBA provides DVA with information about lenders' variable rates, on the last business day of the month.
DVA recalculates the DHOS Benchmark Interest Rate and advises NAB of the change.
The adjustment to your DHOS home loan repayment and subsidy amount takes effect two months after the advice from the RBA, to allow for administration.
Example
RBA advises DVA of changes in the variable rate on the last business day of October. You will see this change in the DHOS Benchmark Interest Rate reflected in your December subsidy payment.