A guide to single-parent home loans

If you’re a single parent with a single income, getting a home loan approved may seem daunting. However, being prepared and not rushing into a decision may help you get through the process with minimal stress. Spending some time doing your research and preparing your finances early can help make the process as smooth as possible. 

What do lenders accept as income for single-parent home loans?

How much you can borrow for a single-parent home loan will depend on your income, expenses, and existing debts. If you’re living on a single income and have dependent children to support, this could make it harder to get a home loan approved with some mortgage lenders.

Lenders may accept parenting payments like child support as income, provided this is a regular and long-term arrangement. Financial institutions may also accept concessions from the government, like the Parenting Payment or the Family Tax Benefit from Centrelink as income.

Not all banks and mortgage lenders will have the same income requirements for home loan applications. You can consult a loan advisor or mortgage broker to better understand what specific lenders may accept as income. 

What do you need from your single-parent home loan?

Buying a home is a significant financial decision, and taking on a home loan is a long-term commitment that requires careful consideration.

When looking for a property as a single parent, you may struggle to find one that matches all your requirements, and is also within your budget. For example, you may need to choose between a home located close to your children’s school or your office, a home with a backyard and a bedroom for everyone, or a home that requires less maintenance.

You can use an online home loan calculator to estimate the repayments you can afford based on your current income, expenses, and liabilities. You can also get an idea of the maximum amount you may be able to borrow, which could help you further narrow your search for a suitable property.

How to qualify for a home loan when you’re a single parent

Home loan eligibility requirements differ between lenders, but there are a few consistent requirements across all lenders. These standard requirements include:

• You must be over 18 years old.
• You should be an Australian citizen or permanent resident.
• You must have a regular monthly income.

Raising children on a single income is difficult, and you may find it tough to save the money you need for a deposit and other expenses. But if you’re patient, make a budget and stick to it, it is possible to get there eventually.

The higher the deposit you can save, the less you’ll need to borrow. If your deposit is more than 20% of the property value, you can avoid being charged for Lenders Mortgage Insurance (LMI). This could potentially cost you thousands of dollars, as the smaller your deposit, the more you could be charged for LMI.

You can also check the various home loan grants for single parents available from the government and if the lender will accept these as part of your deposit amount.

Are first home buyer benefits available on home loans for single parents?

If you’re a single parent who also happens to be a first home buyer, you could be eligible for one or more government support programs, such as:

• The first home owners grant (FHOG) is a one-time payment that can go towards your first mortgage deposit. Every state and territory manages the scheme individually, so there may be different FHOG requirements depending on where you live.
• The first home super saver scheme allows you to use voluntary repayments made into your superannuation fund as part of your deposit for a home.
• The Home Guarantee Scheme (HGS) was originally named the first home loan deposit scheme, and assists eligible first-time buyers to buy a property with only 5 per cent deposit. The government will then guarantee the remaining 15 per cent to make a 20 per cent deposit, potentially saving you up to $10,000 in LMI.
• The Family Home Guarantee (FHG) is a part of the HGS specifically for single parents. Eligible applicants can purchase a property with a deposit as low as 2%, without paying LMI. Additionally, FHG applicants can be either first home buyers or previous owners who do not currently own a home.

You don’t have to do it alone

Going through the entire process of searching for a property and applying for a home loan as a single parent in Australia can be overwhelming. If you know someone who has been through the process before, it may help to reach out to them for information and advice.

You may also be able to ask your family to help by guaranteeing your home loan with the equity in their own property. While this option may not be available to every single parent, it can make a big difference to your mortgage search, and may allow you to apply for a home loan with a low deposit or even not deposit and still pay no LMI. Just keep in mind that your guarantor will become responsible for your mortgage if you’re unable to make your repayments, so it’s important for everyone involved to be aware of the risks.

You can also seek assistance from a mortgage broker who can offer expert advice, help you through the whole process and offer support every step of the way. Brokers will be able to advise which lenders may be best suited for you and any government grants or schemes you may be eligible for.

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