Single parents looking for ways to afford a home need to think about ways earn more cash.
Saving to buy a home is a difficult task for two people, especially when the couple has a dependent child. For single parents the task can be even more difficult. How can a single parent afford a home?
One thing to remember is that a home loan lender is interested in your capacity to repay the loan, not whether or not you are a single parent. If you have sufficient income and meet the lender's credit criteria, then there’s no reason why you can’t get a home loan. The question is how much you can borrow on a single income.
You will need to meet the usual home loan eligibility criteria. You will need a deposit, a history of savings and an income. As a single parent, though, you may have access to some alternative income sources that could help support your application.
Using Centrelink payments as income
As a single parent, you may be eligible to receive the Parenting Payment from Centrelink. Most lenders will accept the Parenting Payment as part of your income. In addition to this, you may be eligible for the Childcare Benefit, which is also an acceptable form of income. The federal government also offers the Family Tax Benefit, depending on your income. Once again, most lenders will accept this as a form of income, depending on the age of your children.
If you're receiving child support payments from a former partner, these are also taken into account when assessing your income.
For a full list of the Centrelink benefits lenders accept as income, read our guide.
Compare mortgage brokers
You may want to look into getting a mortgage broker to help you. Mortgage brokers have an intimate knowledge of which lenders to approach to obtain a home loan for a single parent. They'll know which lenders will accept government assistance as a source of income, and will help you work out how much you'll realistically be able to borrow to avoid being rejected for a loan. Best of all, mortgage brokers generally obtain a commission from the lender, so it's a free service to consumers. You can compare brokers below, and if you're interested, you can click 'Enquire' to lodge an obligation-free enquiry.
Tips for single parents who want to buy a home
Trying to put together a deposit for a home while raising a child on a single income can be difficult, especially as the costs of both are increasing. Take note of the following if you're looking for ways to save for a home and you're the provider for a dependent child.
- Government assistance. As mentioned above, single income parents may be eligible for the federal government’s Family Tax Benefit A & B, Parenting Payment and the Child Care Benefit. Government assistance can help cover the incidental day-to-day expenses and larger expenses like rent and child care, which can give you a little more room in the budget to save.
- How much do you earn? When it comes time to apply for your home loan, you will want to know how much you can borrow. A higher income means you can borrow more, and pre-approval will give you a ballpark figure. Once you’ve done a comparison of home loans, speak to the lender directly to find out whether parenting-related payments can be included on your home loan application.
- Increase your income. This is an obvious one, and something that is easier said than done. We covered some possible ideas for increasing your income in our 12-week challenge. Although these solutions are not for everyone, renting out a spare room on a website like Airbnb is a serious money maker.
- Budgeting. A budget is essential to any financial plan. List all the money you get, your income, and look at ways to cut down on the money going out. You can find out how to make a successful budget in our 12 Week Financial Fitness Challenge.
- Get a savings account. Although the first home saver accounts scheme is no longer in operation, high-interest savings accounts are great if you’re saving for a goal, such as a mortgage deposit. Not only do the accounts let you earn interest, they also come with features to help you save. Automatic savings plans are a great way to save for a goal.
- Get the right home loan. Spend some time comparing home loans and find the loan that’s the right fit for you. The right loan charges less fees and gives you the flexibility to change the features as your situation changes in the future. A comparison of fees vs features now will save you time and money later.
If home ownership is not your aim and you want to rent, there are a number of social housing services that provide cheap accommodation for single parents. The Community Housing Assistance website has details about the concessions available to single parents and contact information for the different schemes operating in each state.
A dual income household can borrow more money than a single parent, but single parents can still get a home loan. The issue is borrowing power. High-income earners have greater access to financing. Compare loans and speak to lenders to find out whether they can help you afford a home.