Is it possible to buy a home on a single income?
Buying a home solo in Australia can feel particularly challenging, especially with rising property prices and strict lending rules. However, owning a home on a single income is possible. This guide will walk you through how to plan and what you need to know.
Step 1: Set clear expectations
Start with a realistic, grounded view of what’s possible on your income. This doesn’t mean lowering your standards, it means tailoring them to your financial reality so you can make smart decisions. There are a few things in particular to consider when budgeting on a single income:
Location flexibility
Growth suburbs or regional areas may offer more affordable options upfront. This can help you get into the property market earlier and support you to buy in your ideal area later.
Property type
Consider townhouses, units, or apartments that may be more budget-friendly. Make sure to factor in how the value in the property you choose may change over time.
Timing
Timing is key when buying a home – it’s personal and depends on your situation. You might be ready sooner than you think or need more time to plan. Talk to us to see where you stand financially and whether you’re financially ready to buy a property.
Step 2: Understand your borrowing power
Your borrowing power is how much a lender is willing to let you borrow — and it’s influenced by:
- your net income (after tax)
- existing debts and regular expenses
- number of dependents
- interest rates and loan type.
If you have children or other dependents, lenders assume your household expenses will be higher, which may lower your borrowing power. This doesn’t mean you won’t get approved but you may need to adjust your budget or property expectations accordingly.
Step 3: Organise your finances
Your borrowing power is only a part of the picture. Lenders want to see that you’re financially reliable and can handle repayments in the long-term. Here are some approaches:
Reduce debt
Reduce existing debts (for example, credit cards and personal loans) to demonstrate to lenders that you can manage your finances responsibly. This may involve consolidating debts or creating a strict repayment plan to pay off debts more quickly.
Build your savings
Save consistently using a dedicated high-interest savings account for your home deposit. Allocating even a small amount regularly can significantly strengthen your application over time.
Cut down on expenses
Create a detailed budget to identify areas where you can reduce spending. Lenders want to see that you can manage your finances and maintain a consistent lifestyle, which can improve your chances of getting a loan.
Maintain financial stability
Before applying for a home loan, avoid major financial changes (like switching jobs or taking out new loans). Stability demonstrates reliability to lenders, making you a more attractive candidate for a mortgage.
Step 4: Strengthen your loan application
When applying solo, lenders look even more closely at your overall risk profile. Here’s how to boost your chances:
Stable employment
Showing you have been in your current role for at least 6 to 12 months before you apply for a home loan shows you have a regular income stream and are more likely to meet your repayments. If you’re self-employed and looking to buy, speak to us, we can talk to you about preparing the right paperwork for your loan application.
Good credit history
Make sure you have no missed payments, defaults or large debts. Building your creditworthiness shows lenders that you can manage and repay your loans.
Larger deposit
Saving a larger deposit (15% or more) reduces the lender’s risk. While this can be tricky on a single income, building this into your buying timeframe can help you chances of securing a loan.
Consider co-borrowing
Partnering with a family member or friends can help make home ownership more affordable. A co-borrower can share the financial load of saving a deposit and can boost your overall loan application.
Step 5: Find government schemes and grants
If you’re a first-time buyer, there are a number of state and federal schemes that can make a big difference, especially on a single income. Some grants or schemes can be combined but others can’t, and it’s worth doing a bit of research so you know exactly what is available to you. Make sure you double-check eligibility before you apply.
Explore government home loan grants
Achieving homeownership on a single income
Buying a home on a single income may take extra planning, but it’s achievable. The right mindset, smart financial habits, and knowing your options can put the goal within reach.
Start where you are, take small steps and seek personalised financial advice. And remember, the right home doesn’t need to be your forever home. It just needs to be your next step forward.
Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/home-property/buy-first-home/single-income
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
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