Buying a home when you are single can be really difficult. But I did (with some help) and you can too! Here’s everything you need to know.
Growing up, I never really thought about owning my own home. But when I was 23 I moved to Sydney for work and was thrown into an incredibly competitive rental market.
At the time there was a massive rental shortage, there would be 30 people at a rental inspection for a small apartment – and all 30 people would submit an application to get the apartment! The only way you could secure a place was paying WAY more than what they were asking for the property, and in my case, I managed to secure a 2 bedroom apartment with a mate for $450 per week (when they were asking $400).
I knew this wasn’t going to be sustainable so I started to make enquiries about buying my first home.
I had less than one years employment history, a very modest income (i.e. minimum wage), a few credit cards and no deposit so I was quickly told by the bank that I couldn’t afford a loan. They did tell me what I needed to get a loan, which was more deposit and a higher income so I went away and started focusing on these two points and after a while, the idea of buying a home crept back into my head.
The difficulties of buying a home as a single person
The reality is buying a home when you are single isn’t that easy. Spending your Saturday mornings going to property inspections on your own, seeing lots of couples at the same inspections… It can feel a bit lonely.
Not only that, getting a loan with one modest income can be challenging – two incomes is going to be better than one. It is also more difficult to save a deposit on one income, and can be super daunting to think about moving homes and having to maintain it on your own!
But I did it, and you can too. Here is what you need to know from someone that made it from singleton to property owner!
Work out what you want
Take a step back. Then another. Now is the time to think about what you really want in your life, the type of life you want to live. Then look at your situation and see if owning a home is going to get you closer to that life that you want.
For the majority of people (including me), the biggest financial decisions are also the biggest life decisions, so it isn’t necessarily the financial decisions that you need to think about here. Just because something makes sense financially on paper, doesn’t necessarily mean that it makes sense for you personally and that’s completely fine.
You need to ask yourself, am I looking at moving cities anytime soon? Does this place feel like home? Do I want to travel around a bit more, or am I looking for stability? Do I want this home to fit a family, pet or partner? Can-am I ready to take on homeowner duties like repairs? What is it about buying a home that attracts me? What are my personal finance goals and will buying a home impact them?
Work out what you have
Now its time to do some research and ask around. I went straight to a mortgage broker who walked me through the process and what the numbers look like. With their help, I learned that closing my credit card and saving up a reasonable deposit would massively increase the price range I could afford.
In general, it really helps to spend a bit more time saving up some extra cash. A reasonable deposit of at least 5%, and ideally 8-10% will make the home loan costs much more manageable.
One thing my mortgage broker made me aware of was how important it was to have an emergency stash to cover the extra costs of owning a property, repayment increases and ongoing repairs. These are clearly important for anyone that is buying a home, but extra important for single homebuyers.
At Hunter Galloway we cover these details with all First Home Buyers in our Free Information Session, we look at a few simple factors like How much you can afford, what you need in savings and deposit and your credit rating.
Of course, it isn’t easy to save that much when you’re only on one income. Fortunately, I kept saving and kept researching properties in the market.
Set goals create a budget
Once I had decided that I wanted to own a home, and I had a clear idea on what I needed to save I had a pretty clear goal to help drive my budgeting. Incredibly I found once I had this goal set everything started to come together because I finally had something that I was excited to work towards and finally found saving to become rewarding rather than an exercise in missing out!
The only way of achieving my goal was to save 30% of my income – which seemed very aggressive at the time. I set up a new bank account and asked my work to stick the 30% of my income into my ‘Property Mogul’ account and the rest in my normal day to day account to live on. Practically I did cut back on lots of simple things which turned out to be stuff I used to waste money on. I brought lunch every day and I didn’t spend my weekends at the pub – but I was happy to do this because I was working towards a bigger plan.
I used a fairly simple spreadsheet to track my expenses each week, and I know now there are lots of apps like PocketBook and You Need a Budget but I still $100 per week allocated to entertainment and other social activities but was diligent in staying within my budget. It was amazing how quickly this helped me change some old bad habits, and if I ran out of cash (well in my budget) during the week I would stop buying a cappuccino before work or seeing a movie at the cinemas.
As I said earlier, my mortgage broker taught me that paying off existing debt is a critical first step so I got rid of my credit card. Overall this meant that it took more time to save for my goal of buying a home, but really helped when it was time to apply for a loan because I could get a bigger loan.
Here are some of my favourite savings hacks:
- Put your savings first. Have the amount you want to save taken out first (by sticking it in a separate account) before worrying about your budget.
- You gotta keep it separated. Make sure your savings and your day to day funds are completely separate and don’t get mixed up.
- Celebrate the quick wins. Once a month check in what you’ve saved to help you stay motivated. Seeing that cash bank up and get closer to your goals will keep you on track.
Build your support team
Getting your savings together is only the beginning of buying a home… At the end of the day buying a home is crazy stressful and takes lots of patience and resilience.
You can spend months searching for a property, wondering if you’ll ever find the right place for the right price. You might be stressing about maintaining your new home or be unsure about your ability to negotiate with the real estate agent. I worried about this stuff more and more and more as time went on. The anxiety of buying a home can be just as hard as the budget, so you need to have a plan for managing this too!
You’ll find people you trust throughout the home buying process that will become part of your support team. My mortgage broker was always there, helping with RP Data reports and he was even able to increase my borrowing capacity by looking at other lenders. At Hunter Galloway, we help first home buyers at this stage by giving them access to these RP Data electronic valuation reports (for free!) and give advice on negotiating with real estate agents.
Don’t be afraid to ask your friends and family too. One of the most difficult parts of getting a home when you’re single is making such a massive decision on your own. It does help to have a second opinion there, so ask your friends and family what they think and use them as a sounding board.
Beg, cheat, steal
What if you’ve been saving for ages and feel like you’re going nowhere? Are there any shortcuts in buying a home when you’re single?
Short of begging, cheating or stealing there are a few other ways you can approach buying a home and getting some help from the people around you.
- Look at your brothers, sisters, relatives or friends: If you can’t get in yourself, look at partnering with friends or family. A recent survey from CBA indicates the number of mortgage applications with greater than 2 applicants has increased to 67% in 2016.
- Enquire at the Bank of Mum and Dad: Guarantor loans are on the rise, and according to figures from ANZ the number of parents guaranteeing their kids home loans has increased from 5% to 20% since 2013.
- Get a side hustle: We all know its costs lots to buy a home. If you’re finding it hard to save with your income, or don’t make enough income from your daytime job think about getting a side hustle like Uber or at a cafe. When I was saving for my first home I did some website work on the weekends to help bolster my cash savings faster.
- Think about Rentvesting: Rentvesting is about living where want and investing where you can afford. If you can’t afford the dream house you want or the suburb you’ve already dreamed then continue to rent or live there and invest the difference in buying an investment property further out.
You’re home & hosed
There are heaps of things that go into finding a home. Clearly, money and budgeting is a big part of it, and its always hard to balance how much you can afford versus what you really want to buy – I call it having a champagne taste, on a beer budget. If you can’t quite afford the home you want, in the suburb you want maybe try looking one suburb along but it’ll be worth all the hard work in the end!
Talk with an experienced broker to see what you can afford
Our team here at Hunter Galloway is here to help you buy a home in Brisbane. Nathan & Joshua Vecchio are Senior Mortgage brokers who specialise in making your home journey easy.
Unlike other mortgage brokers who are just one person operators, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please get in touch here and we can book a time that suits you – either a phone call information session or a face to face meeting (which doesn’t cost anything for you)
Steps to buying your first home
- Understand your credit score
- Work out a budget for your home
- Save up to cover a deposit and other costs
- Have a rainy day buffer, to cover any unexpected costs when buying a home.
- Practice your mortgage payment before you get the loan.
- Talk to a mortgage broker
- Go shopping and find the right home for you
- Buy your first home!
- Plan the housewarming party.