Blog 5 tips to buy a home on a single income

5 tips to buy a home on a single income

25 May 2021
5 tips to buy a home on a single income

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Saving up for a house deposit when you’re on a single income is difficult, but not impossible.

Sometimes, two is better than one and that definitely applies to incomes if you’re trying to save up for a house deposit. But don’t let that deter you! It’s definitely possible to save up for a deposit even if you’re on a single income, it just requires a bit more discipline.

Here’s how to buy a home on a single income.

1. Go in with realistic expectations

Having one income (usually) means less income overall which also means you will have less borrowing power. That’s because your ability to service (repay) the loan as a single income person will be lower than a double income household. Saving up for a deposit is one thing - being able to afford the repayments while putting food on the table and paying for all your other essential bills and weekend brunches/festivals etc is another.

The average first home buyer loan in 2021 is $426,971 according to ABS data, and it may be even less if you’re on a single income. Because your borrowing power is smaller, this will limit what you can afford to buy, particularly with rapidly rising house prices. This will mean a compromise will have to be made somewhere, whether that’s buying an apartment or a townhouse if you want to stay inner-city, or moving further out to a cheaper location if it’s a standalone house you’re after.

But a smaller borrowing power isn’t always a bad thing - it also means your repayments will be smaller! And with interest rates at historic lows, it means you can lock in a low rate and pour your money into paying down your home loan, so you can own it sooner.

2. Be prepared to make some serious sacrifices while you save

Short of winning the lotto or being gifted a very generous sum of money from a relative, you’ll have to scrimp and save hardcore. Take a hard look over your finances and see if there are any areas where you can cut back. Do you really need four TV streaming subscriptions? Could you forego that pricey F45 gym membership for a cheaper gym membership, or better yet, working out at home or in the park for free? You may also find that you have to sacrifice other things, like having brunch every weekend or getting Uber Eats.

3. Take advantage of first home buyer perks

If you’re buying your first home and meet the eligibility criteria, you could take advantage of the numerous first home buyer incentives to get into the market sooner, such as the First Home Loan Deposit Scheme, the First Home Super Saver Scheme, or HomeBuilder.

4. Ask for help

This isn’t going to be an option for everyone, but if you’re lucky enough to have parents who are in a financial position where they can afford to help you get into the market sooner, either by going guarantor or gifting you a chunk of cash to put towards your deposit, then it’s worth asking.

5. Consider rentvesting

Rentvesting is growing in popularity among first home buyers who are priced out of the area they really want to live in. Rentvesting is where you buy an investment property that’s within your budget and continue renting in the area you want to live in.

Rentvesting is a strategy that’s been around for ages but has become more popular recently with house prices rapidly rising. It can be a smart way for struggling first home buyers to crack the property market because it allows you to buy a property purely from an investment perspective, focusing on capital growth and rental yield, which you can eventually sell and use the equity from that property to purchase a property to live in.

Ready to start looking for your next home? Get pre-approved by starting a home loan application today.

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