Australian Government - Department of Defence - Department of Veteran's Affairs

Construction loans


You can take out a construction loan and be eligible to receive DHOAS subsidy payments on the loan. Usually, construction loans involve around four drawdown milestones until building is finalised.

Special conditions and arrangements apply to construction loans, depending on when you want to access the DHOAS subsidy on your home loan.

The following are your options:

  • Commence subsidy payments following the first drawdown. Then, after each subsequent drawdown, submit a new subsidy certificate to have your subsidy increased, based on the higher home loan balance.
  • Suspend the commencement of your subsidy payments until your home loan balance is higher following further drawdowns or once the home loan is fully drawn down at the completion of construction.

These options are explained in detail below. Your choice will depend on how you wish to use your DHOAS entitlement, in a way that suits your personal circumstances.

As you will receive DHOAS for as long as you have a service credit (and meet other Scheme conditions), the start date of receiving DHOAS does not make a difference to the length of time you can receive the subsidy. For example, if you are entitled to receive DHOAS for 10 years, you will receive 10 years of monthly subsidy payments (as long as you have an eligible home loan) from the time you start accessing DHOAS, whether it is now or at a later date. 

If you elect to start receiving subsidy payments during the construction process you will expend some of your DHOAS entitlement on subsidy payments that are calculated on a lesser home loan amount. 

Or you can opt to delay the start of your subsidy payments until the building of your home is completed and your home loan is fully drawn down.

Please note: If you are applying for a lump sum, you need to ensure that the subsidy certificate on which the lump sum is being paid is applied for, and issued, prior to the property becoming occupiable. Further details are provided below, under postponing subsidy payments.

 

Option 1 – Commence payments

  • Payments on construction loan
  • Payments on both land and construction loans
  • Accessing multiple subsidy certificate
  • One certificate at a time

You can choose to receive subsidy payments on your DHOAS construction loan, while your home is being built. The following steps are involved in accessing your subsidy:

 

Step 1: Apply for an initial subsidy certificate to take out your DHOAS construction loan. For this initial certificate you apply by submitting an Application for Subsidy Certificate form.
Step 2: You provide the certificate to your Home Loan Provider, who advises DHOAS when your home loan settles and the amount of your balance, at that time.
Step 3: At settlement, you submit to DVA a completed Subsidy Authorisation Request Form, indicating you are meeting the conditions of the scheme. This is required before DHOAS can commence your subsidy payments.
Step 4: DHOAS calculates your subsidy based on the amount of your home loan that has been drawn down to meet construction costs – at the time your subsidy is paid.
Step 5: To have your subsidy increase in line with your higher home loan balance after a further drawdown, you must submit a Change of Circumstances form. DVA will process your form and contact your Home Loan Provider to confirm your loan balance. You continue this process for each drawdown until your DHOAS home loan is fully drawn down.
Step 6: You advise DVA when your home is built and becomes occupiable, and you’re meeting the occupancy conditions. This is required to ensure your subsidy payments can continue. You use a Change of Circumstances form form to provide this information.

 

Payments on land and construction loans

You can choose to commence subsidy payments on your DHOAS land loan, following the usual steps to access the DHOAS subsidy. 

When you are ready to build, you can keep your land loan and also take out a construction loan. You can be paid subsidy on both loans.

Or, you can combine your land and construction costs into one loan and your subsidy will be paid on this combined loan.

You will need to discuss with your home loan provider which option is better for you. Either way, you can receive subsidy on the amount of both loans.

The following steps are involved in establishing your subsidy payments when you are ready to start construction and extend beyond your initial land loan:

 

Step 1: Apply to DVA for a subsidy certificate. For this purpose, you use the Application for Subsidy Certificate form.
Step 2: You provide the certificate to your home loan provider, to establish the new loan arrangements (land and construction loans, or both combined).
Step 3: Your home loan provider reports to DHOAS the new loan arrangements.
Important: If you have two separate land and construction loans you will need to have the bank report to DVA the balance of both DHOAS loans. These two amounts will need to be reported under the one account number. This is because you cannot have subsidy payments made into two loans at the same time.
Step 4: DHOAS calculates the subsidy payable to you on the increased loan balance/s.
Step 5: After establishment of the loan/s, you may wish to access subsidy on your higher home loan balance after a further drawdown on your construction loan. To have your subsidy increase in line with your higher home loan balance after a further drawdown, you must submit a Change of Circumstances form. DVA will process your form and contact your Home Loan Provider to confirm your loan balance. You continue this process for each drawdown until your DHOAS home loan is fully drawn down.
Step 6: You advise DVA when your home is built and becomes occupiable and you’re meeting the occupancy conditions. This is required to ensure your subsidy payments can continue. You use a Change of Circumstances form to provide this information.

 

Accessing multiple subsidy certificates

Key considerations for accessing multiple subsidy certificates for construction loans are:

Serving members

As long as you are serving in the ADF, you can apply for as many subsidy certificates as necessary to complete the process.

Separated members

You can access only one subsidy certificate after you separate from the ADF.

You may elect to hold off starting your DHOAS assistance until construction is completed on your home and you have fully drawn down on your loan. This way you will require only one certificate.

However, you must use your certificate to commence subsidy payments before it expires. Certificates are valid for 12 months only and there is no option to extend.

Reservists need to be mindful of effective service requirements. If you do not complete effective service you will be deemed separated and have access to one subsidy certificate only.

One certificate at a time

A member can hold only one valid subsidy certificate at a time.

Your home loan provider will advise DVA when you have presented a subsidy certificate and you have made a drawdown on your home loan. We can then process your application for your next subsidy certificate.

 

Option 2 – Postpone payments

You can choose to not commence payments on your land and/or construction loan. You may feel that the balance of your loan in the early days of construction, compared to your subsidised loan limit, does not represent the best use of your entitlement period. 

Instead, you may choose to postpone starting your subsidy until you have a higher home loan balance during or after construction.

The following steps are involved in suspending, then later starting, your subsidy payments:

 

Step 1: You complete and submit an Application for Subsidy Certificate form.. You provide the certificate to your DHOAS Home Loan Provider to take out the construction loan.
Step 2:

If, at the time the loan settles, you do not want to commence payments, you advise DHOAS by submitting a Change of Circumstances form. Alternatively, you can send an email to dhoas@dva.gov.au that clearly states in writing that you do not wish to commence payments on your loan. You must provide three pieces of identifying information with the email such as Date of Birth, subsidised prioperty address and your PMKeyS/Service number.

Step 3:

You can commence subsidy payments on your loan at any time. You can use the subsidy certificate that you applied for to take out your loan, as long as it is still valid (certificates expire after 12 months).  To do this, phone the DHOAS Customer Service Centre or email dhoas@dva.gov.au to organise for your current loan balance to be reported to DVA and the date you would like your payments to commence. Your subsidy payments will be calculated on this balance.
NOTE: If your subsidy certificate has expired at the time you wish to commence payments, you will need to apply for a new subsidy certificate using the Application for Subsidy Certificate form

Step 4: If you have not already done so, you will need to submit a completed Subsidy Authorisation Request Form
Step 5: DHOAS will calculate and if you are eligible, commence your monthly subsidy payments.

 

Important: If your current subsidy certificate is your last certificate, due to being separated from the ADF, you MUST commence payments before it expires. Subsidy certificates are valid for 12 months only. There is no option to extend the expiry date.

 

Construction loan and lump sum

If you are taking out a DHOAS construction loan you may also apply for a lump sum payment, if you have sufficient entitlement and meet the conditions of receiving the payment.

Details are provided here about accessing the lump sum when you have a construction loan. You are also advised to review the full details about the lump sum.

Important: Timing of application for lump sum

The lump sum can be paid on any drawdown on your construction loan, including your final drawdown. However, you need to ensure that the subsidy certificate on which the lump sum is being paid is applied for, and issued, prior to the property becoming occupiable.

It is a condition of receiving a lump sum that you must not have previously owned an occupiable home.

If the house you are constructing is deemed occupiable, and you have not yet submitted your subsidy certificate application to DHOAS with the lump sum request, you will not be able to meet this condition.

How to apply for the lump sum

You can apply for your lump sum as part of your initial Application for Subsidy Certificate (even if you postpone subsidy payments and/or the lump sum on your construction loan until a later date).

Or, you can apply on one of your subsequent certificate applications, using a Change of Circumstances form.

In this case, you must also submit to DVA a completed Part G of the Application for Subsidy Certificate (with the Change of Circumstances form). This indicates you are willing to meet the conditions of receiving the lump sum.

Timing of lump sum payment

You can choose to receive your lump sum at one of the following times:

  • When your monthly subsidy payments commence; or… 
  • On a future drawdown; or… 
  • After the final drawdown on your progressive construction loan

The reason you may choose to postpone payment until after the final drawdown is so that the lump sum amount that is deposited into your home loan does not reduce the balance on which your monthly subsidy payments are calculated.

If you wait until all your progressive drawdowns are reported before you receive the lump sum, then your loan balance will not be reduced by the amount of your lump sum.

If you would like to delay receiving the lump sum, and you have already requested the lump sum when you submitted your Application for Subsidy Certificate, please advise DHOAS via email dhoas@dva.gov.au or using a Change of Circumstances form.

If you are providing this request in an email you must provide three pieces of identifying information.

 

Conditions of construction loan

Conditions apply to DHOAS arrangements on construction loans, including a two year construction deadline and 12 month occupancy requirement.

You have an obligation to understand and comply with these conditions if you are going to take out a DHOAS construction loan and receive subsidy payments. Please see, Meet Conditions for full details.

 


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