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Single and looking to buy your first home? You may have heard that lenders aren’t interested in solo borrowers, but it’s not entirely true. Lenders are more interested in whether you are responsible with your money and have sufficient income to meet your home loan payments.
Get to know what you can afford first
If homeownership is on your radar, understanding how much you can borrow is an essential first step. Borrowing power is calculated using your income, living expenses and existing financial commitments to determine how much is leftover and available to service a new home loan. It’s a helpful starting point for working out whether you can service the new debt along with your current living expenses and financial commitments.
Get it right from the start with professional help.
Tips for going soloThere are plenty of ways to get a foot on the property ladder with one income for serviceability, but you may need to adjust your expectations. Remember, it’s your first home, not your forever home. Here are a few options that could make the pathway to homeownership a little easier.
- Investing – Consider buying a property to rent out while you continue to live at home or rent. Rental income and tax benefits may help improve affordability, and once you build equity, you can use it to help buy your next property.
- Downsize – Smaller properties such as units or apartments can be significantly cheaper than houses, and they might even be in locations you prefer.
- Compromise – You might not be able to buy in your first choice suburb, and you might have to accept your home won’t tick all your boxes. But keep in mind that once you get on the property ladder, you can keep climbing up.
- Location – With many work positions becoming remote, choosing an outer suburb or a regional town could get you more bang for your first homeowner bucks.
- Guarantor – A close family member such as a parent may be able to help you get into your first home sooner. By guaranteeing a portion of your loan, you could bypass years of saving for a deposit and get out of paying mortgage insurance too.
How can I look attractive to the bank?If you’ve decided that homeownership is right for you, you’ve probably made some changes to your spending and saving behaviours already. The bank will want to see stable and secure income and a clean credit history. They’re also interested in seeing genuine savings (money that has been in your account for three months or more). By consistently putting money away, it shows you could be disciplined enough to do this with a home loan. Don’t forget to check your credit report to see how your repayment history information looks to a lender. As part of the loan application process, most lenders will take this past credit behaviour into account because it will inform them about your reliability for making on-time payments. You can get a free copy of your credit report once a year from a credit bureau like Equifax or Experian.
Government incentives for first home buyersMost states have incentives designed to assist first home buyers. If you’re eligible, they may help you get over the line. First Home Loan Deposit Scheme First Home Owner Grant (FHOG)
- Useful reading: A guide to the First Home Loan Deposit Scheme
Back yourself with a great teamGet your team of experts in place early so you’ve got a plan and can move quickly when the right property comes along. Mortgage brokers can provide advice and support from the very beginning, giving you the best chance of getting your application approved. A helpful real estate agent and a good conveyancer can relieve some of the unnecessary stress that comes with buying a property.
Protect your incomeAs a solo homeowner, the buck stops with you. Making sure you can always cover your home loan payment should be one of your highest priorities. Put extra away each month or insure your income so that you can continue to meet your repayments if something happens and you’re not able to work.
- Useful reading: A guide to Mortgage Protection Insurance