May 19, 2021 1:47:45 PM

Buying a Home on One Income

Topics: Selling, Mortgage Advisers, First Home Buyer 0

Housing affordability continues to be a hot topic at the forefront of our minds, as rising house prices continue unabated across most parts of New Zealand. While many first home buyers typically buy property with a partner, spouse or family member, it’s unfair to assume that all first home buyers will do the same. Single income borrowers are not uncommon in New Zealand’s property market, so we asked the question, is it still possible to buy a home on one income?

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Determine affordability and borrowing capacity

For many first home buyers, just getting a foot onto the property ladder can be a huge challenge, even for those sharing the cost of a mortgage on a dual income. It makes sense then that single income first home buyers are likely something of an anomaly. But that’s not necessarily true.

It all comes down to determining how much you can afford and how much lenders are likely to lend to you as a single income borrower. Single income earners on a good income could still be eligible for a mortgage.

Lenders will look at your income and expenses, and will want to know that your income can sustain a mortgage while still covering your other expenses. They’ll calculate what your possible mortgage repayments will look like, using an interest rate that is typically much higher than the current interest rates. This is so they can feel confident that you can afford to repay your mortgage even if interest rates rise.

Equipped with knowledge about your borrowing capacity and affordability, you’ll be best placed to make decisions like:

  • Can you realistically afford to buy a home in the area you’d like to live?
  • Do you need to look further outside the major metro areas and consider a longer commute instead?
  • Would rentvesting work for you – renting where you are and buying an investment property further out where it’s more affordable. 

Get in touch with a Mortgage Express adviser to determine your borrowing capacity, as that will give you a good indication of the areas you can realistically afford to buy a home in.

Other forms of income

Finding ways to supplement your income could help improve your borrowing capacity. Getting a flatmate or boarder to share the cost of your home loan repayments, could help boost how much you can afford to borrow. However, it’s vital you check with your mortgage adviser whether this form of additional income is acceptable to your lender. Renting out a room in your home could impact your access to KiwiSaver or the First Home Grant. 

As a single income borrower, there may still be options for you to buy a property with someone else – perhaps a friend or a work colleague – as a way to get into the property market in the short term, with the intention of selling at a later stage to go your own ways. Just adding another person’s income into the mix could make all the difference, but it’s important that borrowers enjoy a good relationship of open communication, that your intentions are clear, and that you get legal advice on the best way to structure your finances together.

If you are considering buying a home on a single income, it’s a good idea to talk to a mortgage adviser first. A Mortgage Express branded mortgage adviser can meet with you, assess your affordability, and help you find financial solutions to fit your needs, or plan ahead to find ways to buy a home on a single income. Contact Mortgage Express today to find a mortgage adviser in your area who is experienced at working with first home buyers.