What are single parent home loans?
As a sole parent, the thought of entering (or re-entering) the property market on a single income can be daunting, both emotionally and financially. But, if you have a deposit (even a small one) and can show you’re capable of meeting home loan repayments, on top of your family’s regular expenses, there’s no reason you can’t take out a home loan as a single parent. In fact, it’s illegal for lenders to discriminate against borrowers solely because they have a family.
While there are no specific home loans for single parents, there is assistance available from the Australian Government that could help get you into a home sooner.
The Australian Government 5% Deposit Scheme can allow single parents and guardians to purchase a home with a deposit of just 2%, with no income caps, waiting lists, or Lenders Mortgage Insurance (LMI). Here’s what you need to know.
What is the Australian Government 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme is a program that helps Australians on the path to home ownership. Despite its name, the program actually has two separate streams, one of which is specifically for single parents:
- The general stream helps eligible first home buyers purchase a home with a deposit as low as 5%.
- The single parent stream helps eligible single parents and guardians with at least one dependent purchase a home with a deposit as low as 2%.
This means that, as a single parent or guardian, up to 18% of your home loan can be guaranteed by the Government. Note that the Government does not pay this portion of your deposit, it acts as a backer, allowing you to purchase a property with a deposit of 2%, as long as you and the property meet all the criteria.
How do single parent home loans work?
Home loans for single parents work much the same way as any other home loan in Australia, in that you’ll need to save up a deposit, apply and be approved for a home loan, and then pay it off over an agreed period of time.
That said, the Australian Government 5% Deposit Scheme has some specific features to make it easier for single parents to get a foot on the property ladder. These include:
Low deposit requirements: Eligible single parents and guardians can use the Scheme to purchase a home with a deposit of just 2% saved, meaning your journey to your new home can start sooner.
Fee waivers: Usually, if you purchase a property with a deposit of less than 20%, you’ll be required to pay costly Lenders Mortgage Insurance (LMI). Under the Scheme, the Government acts as a guarantor for your loan, so this requirement is waived, potentially saving you thousands in fees.
No income caps: Raising a family on a single income can be a challenge, no matter what your profession. You can access the Scheme no matter what you earn, as long as you qualify for a home loan, as there are no minimum or maximum income requirements.
What type of property can you buy with a single parent home loan?
If you can take out a home loan without help from the Australian Government 5% Deposit Scheme, you can buy any property your heart desires (and your budget allows).
If you are using the Scheme, you can still choose the type of property you want to purchase. This means you could buy a stand-alone house, an apartment, a townhouse, a house and land package, or an off-the-plan property.
The only catch is that property price caps apply to the scheme. These differ by capital city, state and territory, but to give you an idea, the property price cap in Melbourne at the time of writing is $950,000. You can see a full list of the property price caps in the FAQ section below.
If you’re buying a house through the Scheme, the purchase price (and the value, as assessed by your choice of lender) must be below the property price cap where you intend to buy.
If you want to purchase vacant land and build a home on it yourself, the Scheme also allows this. As above, though, the catch is that both the price of the land and the contract price of the build must be below the cap, and you must build within three years.
How can you compare home loans for single parents?
Comparing home loans is easy with Canstar. Tell us what you need, and we can guide you through the important bits. Alternatively, you can use the table at the top of this page to compare a range of mortgages from lenders participating in the scheme, from Canstar’s database. Note that not all participating lenders are included on our database.
How do you apply for a single parent home loan?
To apply for a home loan through the Australian Government 5% Deposit Scheme as a single parent, there are several steps you’ll need to take.
1. Check your eligibility
You’ll need to be:
- A single parent or guardian with at least one dependent child, buying the property on your own
- Aged over 18 and an Australian citizen or permanent resident
You’ll need to purchase the property as an owner-occupier, meaning you plan to live there. Properties bought through the scheme cannot be used as investments. You’ll also need a principal and interest home loan of up to 30 years–you cannot use an interest-only home loan.
2. Apply for a home loan
The Australian Government has authorised more than 30 lenders around the country to take part in the scheme, so to get started, you’ll need to apply to one of these. On application, your lender will ask to see:
- Proof of ID and citizenship
- Proof that you are a single parent or guardian
- A completed Home Buyer Declaration Form
During the home loan application process, lenders will also ask to see proof of income, three to six months of bank statements, and statements from any credit cards, personal loans, HECS/HELP balances, or other debts you have.
3. Search for a home
Once your lender has assessed your application, it will pre-approve you for a purchase of up to a certain amount. You’ll then have 90 days to find a property and sign a contract of sale.
Note that the purchase price of the home (and the value, as assessed by your choice of lender) must be below the property price cap in your area.
4. Buy a home and start paying off your mortgage
When you find a property that fits your needs, budget, and your lender’s requirements, you’ll sign a contract of sale. Once the purchase has settled, you can move in with your family and begin making regular mortgage payments.
Who is considered a single parent or legal guardian?
To be eligible for the Australian Government 5% Deposit Scheme, you need to be single, meaning you have no spouse or de facto partner. If you’re separated from your spouse but not divorced, then you’re not considered single for the purposes of the Scheme. You will also need to be the natural parent, adoptive parent, or legal guardian or one or more children.
What are some other schemes that can help you buy a property?
In addition to the Australian Government 5% Deposit Scheme for single parents, there is also the First Home Super Saver Scheme (FHSS), which allows first home buyers who make voluntary contributions to their super to put these towards a house deposit.
The Australian Government Help to Buy Scheme allows eligible buyers to purchase a home with a minimum deposit of 2% and no LMI. The government contributes up to 30% for existing homes or 40% for new builds, meaning it will own a share of the property, and a proportional share of any gains or losses when you sell the property or buy them out. Note that income and property price caps apply to the Help To Buy Scheme.
There are also First Home Owners Grants and concessions on offer from each state and territory.
