Want to buy a house on one income? Wondering if it is possible to get a house on one income?
Many people aspire to buy a house on their own. There can be a range of different reasons. Some people are single. Others do not want to go into the purchase with someone else. Other people are in a couple, but there is just one income earner. While joint applications are generally easier to approve if there are two incomes, this article examines the question in more detail.
It can often come down to income
Banks and lenders will work out what the possible mortgage repayments might be like, and add a buffer or margin on top of that. For example, if the mortgage repayments for a property are meant to be $600 a week, they might test your income at a buffer of $650-750 a week. This helps them get more confidence that if interest rates rose, or your situation changed, you would not be so adversely affected.
The bank or lender will then want to know that your income can sustain this mortgage, plus your other expenses.
Other expenses can include a wide variety of matters, such as:
– Other loans you have, and credit cards,
– Childcare / daycare costs
– Power, water, and other utilities
– Money spent on food
In assessing this, this is where typically it makes it harder for a single person or a couple with one income earner to buy a property. However if the income was significantly higher, then this is more likely.
Rent the property out?
If you rent a property out, this can also help plug any gaps in a lack of income. However if you rent the property out, you need to be mindful of a variety of different matters, such as you cannot use your KiwiSaver or get the HomeStart Grant. You also might need a greater deposit if you are renting the property out.
If you are for example, a single person with no children, and you buy a 3 bedroom house, you could for example, have flatmates or boarders in the other bedrooms. Certain lenders in some specific situations may be able to accept that a flatmate will bring additional income. In doing so it might be able to help consider a greater amount of income. Note that you need to be serious about having a boarder or flatmate, and not just saying you will. You should also not solely rely on flatmate income.
A larger deposit can help
If you have a considerably larger deposit than what is required, this may help a situation where you have just a single income.
Identify other ways to increase your income
If you find yourself in a situation where you do not have the income required right now to be enough, don’t’ be disheartened. A financial adviser or mortgage broker can give you some ideas of the amounts you need to work towards. See what you can do to upskill and increase your income over time.
Buy where property prices are lower
Consider whether you actually need to live in expensive cities, or if a move to a more peaceful smaller town may be more appealing. If you buy in cheaper areas, the income requirement can be lower, therefore making the purchase more viable.
Using a mortgage broker or financial adviser
If you use a mortgage broker or financial adviser, it could be easier to buy a house on a single income. They may be able to help you identify lenders that have a lower threshold for income requirements. Or they can help find a lender that accepts flatmates/borders, whereas many others don’t. The broker or adviser might also be able to find other ways to substantiate your ability to meet the mortgage repayments, such as incorporating your overtime income into the application.