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Can you qualify for a home loan on a single income?

Can you qualify for a home loan on a single income?

Many young South Africans aspiring to become home buyers believe that owning property on a single income is just not possible.

“However, the over 40 000 single females and over 35 000 single males who have already purchased property across South Africa this year will beg to differ,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

While it might be trickier to qualify for the necessary financing on just one salary, Goslett says there are many who have been able to think up a solution to make it happen.

To purchase property on a single income, buyers need to be earning a minimum of around R15 000 per month after tax, he says, which will allow them to afford a home loan of around R500 000. "Admittedly, this does not afford a person much, but it is possible to purchase a small apartment or a fixer-upper for this amount if you know where to look."

Single buyers should also keep in mind the bond, transfer and initiation fees that go along with such a purchase, which would cost them just over R30 000 on a R500 000 property, advises Goslett.

Goslett suggests ways to work around the challenges of buying property on a single income:

Two is still superior to one

While it very well may be precarious to fit the bill for a home credit on a solitary pay, particularly in case you're taking a gander at houses over the R1 million value point, in case you're attempting to secure the vital financing, Goslett says you could ask a relative or dear companion to sign as surety for you. This enables you to apply for a line of credit considering their financial assessment.

"In any case, you have to clarify that the banks will come thumping on their entryway should you ever miss the mark on instalment, so make certain to apply just for sums you can manage." Don’t get stuck in red tape

Many first-time buyers are unaware that simply having the available funds does not grant instant access to a home loan. To qualify at most financial institutions, the main applicant will need to have a life insurance policy, with some institutions even going so far as to specify additional disability cover, says Goslett.

“Admittedly, this additional monthly expense is a frustrating drain on a single-income household, especially if you don’t have any dependents to provide for after your untimely death. However, banks need these policies as surety that the outstanding amount will be paid no matter what may happen during the lending term. Single-income buyers will need to bite the bullet on this one and factor in this additional monthly expense when budgeting for their home loan.”

Less is also more

One should always remember to count one’s blessing and not one’s losses, says Goslett. "The truth is that, unless you have children, while you may only have one income to cover all your expenses, you also only have one mouth to feed, one body to clothe and one person to entertain. Your income may total a lower amount, but so will your expenses. And, without a partner to consider, the only person you may hold responsible for a lack of savings is yourself.”

Make the most of your situation by saving up for a sizable deposit, which can help you qualify for your home loan, he says.

More to consider

“It is true that owning property on a single income comes with its difficulties, but the same can just as easily be said for owning property on a dual income, with questions like ‘How do we weight the payments?’ and ‘How do we split the property if the marriage fails?’ instantly springing to mind,” says Goslett.

Purchasing real estate always comes with a few challenges that homeowners, whether single or married, will have to work around, however, the long-term benefits of financial security are well worth the troubles you might face at the start of any home-buying process, he says.

Finally

“I would suggest that buyers work through a bond originator who will know which home loan options are available to them. They can also advise them on the various prerequisites involved when applying for a home loan and can collect a set of quotes on their behalf to ensure that they get the lowest possible interest rate on their home loan,” says Goslett.