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Single Income Home Loan
Want to buy a home on a single income? Home loan options may be broader with two borrowers, but you can get a home loan on a single income.
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Getting approved for a home loan on a single income is definitely an option, though your success depends on how much you earn and your current cost of living. You'll need to carefully work out how much you can borrow and repay comfortably and make sure that your spending is under control before you apply.
Follow our tips below and you'll find yourself in a much better position.
Work out your borrowing power
Your chances of approval depend in large part on how much money you want to borrow. From a lender's point of view, a realistic borrowing amount takes into things like:
- Your income - generally, banks want to see you spend no more than 30% of your income on a home loan
- Your expenses - lenders will look through your bank statements carefully to see how you spend
- Your deposit size - the bigger your deposit, the more likely it will be that a bank will approve your loan
- The value of the property you're buying - the property value needs to be in line with your income
Use a borrowing power calculator to estimate how much a lender will give you.
Save a 20% home loan deposit
The bigger the home loan deposit you can save, the easier the home loan approval process becomes. If you had a 60% deposit, lenders wouldn't think twice about lending to a borrower on a single income. Of course, that's not very realistic for the average borrower.
Saving a 20% deposit, however, is more realistic and a good way to strengthen your application as a single income applicant. It's not essential, as low deposit home loans are available for borrowers with deposits as low as 5%. But approval does get a lot harder, especially on a single income.
Get your debt and spending under control
In the months leading up to submitting your home loan application, get your spending under control. Review how much you're spending each month, identify areas where you can cut back (if any), set a budget and stick to it. This will make your lender happy and makes you a more reliable borrower, whether you're on a single income or not.
If you have urgent debts, such as personal loan or credit card debt, you should focus on paying them down before anything else. These debts will weigh against you in any mortgage application.
Choose your property carefully
The property you wish to buy is your lender's security in the event you can't repay your loan. It minimises the lender's risk because they can take the property (in a worst case scenario).
This means your lender cares about the property you're buying. Your lender will have the property valued to make sure you're not paying too much for the property. And if the property is in a poor condition or in an undesirable location the lender may reject your application or limit how much they can lend you.
Some lenders also have postcode restrictions for apartments, meaning they are more cautious about lending to people buying apartments in areas with a high saturation of such buildings.
Check what help is available
You might be buying a property on one income but you're not alone. There may be help available in the form of government grants and concessions.
Depending on your circumstances you may be able to get help from your family in the form of a guarantee.
- First home owner grants. If you're a first home buyer you may qualify for a first home owner grant in your state or territory. You can even use the grant to form part of your deposit.
- Stamp duty concessions. Also for first home buyers, you may qualify for a stamp duty concession. This could reduce your stamp duty costs significantly.
- Parental guarantor. If you have parents who own their own property and are willing to help, they could guarantee part of your deposit. They don't have to pay anything, but they agree to pay some of the mortgage if you can't. This makes your application stronger and means you can potentially buy a property with a smaller deposit while on one income. It's not without risks and it's not an option for everyone though.
Speak to a mortgage broker
Before applying anywhere as a single income home loan applicant, consider speaking to a mortgage broker.
Brokers are experts at helping borrowers find home loans they can qualify for and then guiding them through the application process. If you don't feel confident and want some help with the process a broker is a good starting point.
They might even be able to help you boost your borrowing capacity and get a slightly larger home loan.
Need a competitive home loan? Compare your options
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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