Can I apply for a joint home loan with my spouse if I’m not working?

In Australia, lenders allow couples who are married or living together to apply jointly for a home loan, even if only one of them earns a verifiable income. They may also let family trusts, with the non-working partner named the owner, apply for a loan. 

However, lending to single-income couples is considered riskier as loan repayments can get affected in case of any relationship issues. To qualify for a home loan as a couple when only one of you is working, you’ll need to meet strict lending criteria. For example, you may only be able to apply if you plan to live in the home and not if you’re buying property as an investment.  

Why can’t a non-working partner apply for a home loan? 

Most lenders prefer lending only to salaried or self-employed professionals who can submit verifiable proof of income. As this may not be possible for unemployed or non-working partners, lenders may not consider home loan applications from them even if they have informal income sources. While some lenders may accept a joint home loan application from you and your income-earning spouse, such an application may face a higher level of scrutiny than other home loan applications. 

In addition to income verification and credit checks, couples may also need to prove that they’re married or are de facto partners. Some lenders may also check whether the salaried spouse is liable to face any legal challenges that could result in a claim against their assets. Buying property in the non-working partner’s name is common in such cases, although lenders may still consider lending to such couples to be a risky proposition.

Suppose the couple sets up a family trust that the non-working partner owns for paperwork purposes and applies for a loan through the trust. Some lenders may be willing to lend to this entity only if the person earning a regular income is listed as a beneficiary of the trust, or is a director or unit holder if not a trustee. Again, this is assuming that the trust fulfils other lending criteria. 

Is there any way non-working partners can apply for a home loan?

If you’re a non-working partner and looking to apply for a home loan, your best bet may be submitting a home loan application with both you and your wage-earning spouse listed as applicants. Note that you can still be the sole owner of the home the two of you are planning to buy. However, before contacting a lender or applying for the home loan, you and your spouse may want to estimate your total income. This can include your spouse’s salary as well as any rental income and your informal earnings, which you may be using towards household expenses or accumulating as savings.

Based on your income and regular expenses, you can calculate your borrowing power - the amount you can reasonably afford to borrow and repay for your home loan. You can also calculate the savings you can put together, assuming that you may need to put down a deposit of at least 20 per cent of your home’s value. A few lenders may offer home loans requiring as little as 5 per cent as the deposit in exceptional cases, such as if your spouse has an excellent or above-average credit score, or works in a profession whose members are considered less likely to default on debts. 

If your spouse has only an average credit score or has had credit repayment issues in the past, you may want to consult a financial adviser and take steps to improve the credit score before applying for the home loan. Alternatively, you can request a mortgage broker to guide you in finding a lender offering a home loan suitable for your financial circumstances.

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