Can I get a home loan with a single income?
Yes, you can get a home loan if you’re single or in a single-income household. In fact, getting a home loan with one income is very similar to borrowing with two.
How to get a single-income home loan
Just like for dual-income couples or households, being approved for a home loan with a single income hinges on a number of factors, including your income, assets, and credit score or credit history.
Ultimately, a lender probably won’t care if you’re single or in a single-income household, as long as you can prove you can afford the mortgage repayments, now and into the foreseeable future. Though it might be an issue if your employment is unstable or your income is, or could likely be, volatile.
How to bolster your borrowing power on a single income
An important starting point to buying property on a single income is knowing your borrowing power. Borrowing power refers to the amount you’re likely to be able to borrow.
Knowing this can help you develop a home-buying budget, as it can set a hard dollar limit on the homes you should be looking at. When working out your borrowing power, lenders typically consider your:
- Income
- Regular expenses
- Existing debt
- Interest rate (plus a serviceability buffer in case rates rise)
- Number of dependants
You can head to Canstar’s Home Loan Borrowing Calculator for an idea of your borrowing capacity. Or, if you want a more concrete (albeit still not guaranteed) idea of your borrowing power, you could apply for home loan pre-approval.
If your borrowing power is lower than you would like, you might think about taking some of the following actions.
Consider boosting your income, reducing your spending, or minimising debts
If you’re short on borrowing power, you might start thinking of ways you can boost your income:
- If it’s been a while since your last pay rise, it could be worth giving the boss a nudge to organise a pay review.
- Apply for a side gig to earn extra income.
Another others way you could improve your borrowing power is to reduce your spending. Typically, a lender will consider both your actual spending and how much your household is expected to spend, based on the Household Expenditure Measure (HEM) or a similar metric. If your outgoings are significantly higher than the HEM, tightening your purse strings may boost your borrowing power.
Finally, a lender will factor in any existing debt you have when calculating how much you can borrow. If you want to improve your borrowing power, talk to your lender or broker about whether any of the following could help:
- Cancelling or reducing the limit on any credit cards
- Closing buy now pay later (BNPL) accounts
- Paying down HECS-HELP debts
- Making extra repayments on any personal or car loans
- Consolidating multiple debts into fewer facilities
Aim to save more money
Every extra dollar saved towards your deposit means you have to borrow less to buy a property.
If you’re struggling to build a deposit:
- Consider moving back home with family (if possible) to skip paying rent and ‘power save’ for a set period
- Observe your regular spending patterns and aim to trim costs that aren’t essential
Shop around for a low-rate home loan
Comparing home loans from different lenders may be especially important as a single-income earner.
Lenders each have their own criteria around income requirements, borrowing capacity, and the size of the deposit you’ll need.
Potentially more impactful though, home loan interest rates can vary greatly between lenders. While a small difference can save you thousands throughout the life of your loan, a lower rate could also increase the amount you can borrow.
Further, non-bank lenders don’t have to abide by the mandated serviceability stress tests that banks do. So if you’re on the cusp of the borrowing power you need, it could be worth comparing how much you can borrow with a bank against a non-bank.
Remember to also compare each loan’s comparison rate, which factors in ongoing fees or charges on top of a loan’s interest rate.
If you’re pressed for time or a first time borrower, you can consider using a mortgage broker for help finding a home loan.
Government support for single-income home buyers
A variety of government support schemes are available for people looking to buy a property. While they aren’t all exclusive to single-income home buyers, they might help you get into the property market if you meet the eligibility criteria.
- The Australian Government 5% Deposit Scheme: Lets eligible first home buyers buy a home with a 5% deposit and avoid Lenders Mortgage Insurance (LMI). If you are a single parent, the scheme could help you purchase a family home with a deposit as little as 2% and zero LMI.
- The Help to Buy Scheme: The shared equity scheme can help eligible home buyers enter the market alongside the government, which could contribute up to 40% of the purchase price. In time, the buyer can repay the government’s contribution, or they can hand over an equivalent portion of any proceeds when they sell.
- First Home Loan Super Saver Scheme: You can contribute money into your super and withdraw it later using the First Home Super Saver Scheme (FHSS Scheme) to help you buy a home on a single income.
- First Home Owner Grants: Depending on your state or territory and the property you’re buying, you might be eligible to receive a lump sum to help you buy a home.
Strategies to buy a home on a single income
Consider an apartment, rather than a house
Apartments are typically more affordable than houses. This affordability can give single-income home buyers a reasonably priced entry point into the property market.
Choosing a unit, apartment, or townhouse may also mean less maintenance, which could help make your property easier to manage on your own. Keep in mind that there are pros and cons with investing in an apartment over a house, such as potentially higher strata fees.
Think about regional locations
You may be able to save thousands of dollars by buying a home in a regional area.
If you regularly work remotely from home, it may not be as necessary to buy a home close to your workplace.
Rentvesting
Rentvesting means to buy a property as an investment while continuing to rent yourself. This can be a worthwhile strategy for some, as anticipated rental income is considered as part of a home loan application. It also means a person might be able to buy a property in a cheaper area that wouldn’t otherwise suit their career or lifestyle, without having to upend their life.
Ask a parent or relative to act as a guarantor
A home loan guarantor generally uses their own home equity as extra security for your loan and promises to cover repayments if you default. By having a guarantor, single-income buyers may lower the risk they represent to lenders and boost their chances of loan approval.
