Buying a home is one of the largest financial commitments many people will ever make in their lifetime, and it’s a purchase that many people believe cannot be done by one person on one salary. However, with the proper time, dedication and research, anyone can buy a home on their own – regardless whether they’re coupled up or not!
We spoke to financial advisor Helen Baker about how to buy your home as a single person.
Are there any schemes available to help a single person save for a home?
“A lot of those motivating schemes no longer exist and some that are promoted by sales agents make me nervous,” says Helen. “One to consider is the First Home Buyers Scheme using superannuation. The scheme allows you to access salary sacrificed contributions you made in previous years for the purpose of your home deposit, but it must be your first home.”
“The scheme started from the first of July, 2017, so for many this could be more than two financial years of contributions. The maximum you can take out is $30,000.”
“Remember the devil is in the detail so seek advice from your financial adviser.”
What is the first issue a bank may flag with you when trying to apply for a home loan as a single?
“There is no difference between whether you are a single person or a couple, other than you have some economies of scale as a couple, such as the possibly of double the income than someone who is single,” says Helen. “Therefore, technically you should be able to borrow more as a couple than a single person.”
“Whether single or a couple, the lenders are looking at your credit history and your ability to pay the loan back. With the new “responsible lending” criteria, it is definitely tougher to borrow. The first thing they will head for is your credit score. If you have poor credit rating through lots of loan enquiries, existing debts, bad history (arrears/defaults/bankruptcy) or a “busy” history, then time and better behaviour is your backup plan.”
Do lenders look at single men and women differently when applying for a home loan?
“There is no discrimination on a gender basis. The issue is probably more around the gender pay gap. With men earning more than woman, they are likely to be able to generate a bigger deposit than a woman and also borrow more money, as they have a greater capacity to repay the loan.”
“Broadly speaking it is the 5 C’s of credit: character, capacity, collateral, credit, conditions,” says Helen.
Are there any traps a single home purchaser should be aware of falling into?
“The old saying ‘if it is too good to be true, then it probably is’,” says Helen. “Be aware of those who have a potential conflict of interest, such as buying a property where they setup the finance for you. What rate would you be paying? How do you get out of the loan if the rate is bad, as interest rates can go up? How well is the property built? We have all seen the issues of recent building collapses,” says Helen.
“Watch your spending, as people spend a lot more than they think they do and particularly when they get their own home because they want to put their own stamp on it – renovations are classics for overspend.”
Other top tips from Helen to financially secure yourself include having an emergency fund in case you lose your job, and ensure you have income protection and all other relevant insurances – see your financial adviser about what is right for you.
Note this is general advice only and you should seek advice specific to your circumstances.
Want to avoid buying in Australia’s most expensive suburbs? Watch the video below.
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