With more than 60% of marriages ending in divorce, it is no longer seen as out of the ordinary to be a single parent. In fact, single parents are creating a large market of their own within the property market.
Traditionally, lenders have frequently struggled to work in this space due to a number of unique challenges faced. The good news is, at NMC Finance, we specialise in this type of finance and see it as a significant component of our lending space.
With this in mind, let’s take you through some common issues we have seen over the journey with single parents purchasing a property:
The Australian Government Family Home Guarantee
In usual circumstances, lenders require you to save a 20% deposit in order to avoid paying Lender’s Mortgage Insurance (LMI). The Australian Government implemented the Family Home Guarantee in 2021 which aims to support eligible single parents in purchasing a home by providing a guarantee from the National Housing Finance & Investment Corporation (NHFIC).
This guarantee will enable single parents to purchase a home with as little as a 2% deposit.
The Family Home Guarantee aims to support eligible single parents with at least one dependent child in purchasing a family home, regardless of whether that single parent is a first home buyer or a previous homeowner.
NHFIC (National Housing Finance and Investment Corporation)
How do I access a deposit?
If you have ever gone through a life event such as a divorce or separation before, you will appreciate the serious impact this can have on you financially.
It can often be the most challenging part to recover from as you extract yourself from a financial tangle. While remaining amicable is an optimal outcome, this is not always the case in such an emotional situation.
Accessing enough funds or equity to purchase a home as a single parent can often be difficult but not impossible.
You can use the equity in a family member’s home to assist with purchasing. While there are some legal obligations, this is becoming extremely popular, and you may have heard it being referred to as the “bank of mum and dad”.
Alternatively, you may have been able to secure funds from the previous relationship, which can be used as a deposit for the home purchase. Hopefully, this will be the case for you, and legal fees haven’t gobbled it up!
Thinking outside the square is also essential. While you may not have access to cash to buy a home to live in, another option may be to use your super to purchase an investment property under your superannuation. You can never live in this property, but you’ll get into the market.
As always, this requires very sound financial advice. So tread carefully, but for the right situation can be a viable option.
Do bad relationships = bad credit?
So often, we see people exiting bad relationships with bad credit.
It’s not the end of the game but more an opportunity to reset and go again. Your credit score is becoming more and more critical as time goes on. Having a low score and credit defaults can substantially hinder your lending or increase your interest rate.
It is critical that you take responsibility for every cent of debt you incurred with your ex-partner to make sure your credit file is protected. This doesn’t mean you have to pay all debt but communicating with the finance or phone or utility companies to explain your situation will ensure your good name remains. They are much easier to deal with when you are upfront with them, and they will usually work with you to help you through the situation.
If this is too late and you have bad credit, we can still help. We have “non-conforming lenders”. These lenders understand what you have gone through and work with you to get you into your new home. The interest rates may be a little higher, but it gets the job done and doesn’t have to be forever. Maybe only for one or two years until you become a “mainstream” borrower again.
In short, it is more than possible for a single parent to borrow for a home. You need the right broker to be able to help you navigate the situation and will look at the best option for your circumstances.
Want to find out how you could buy a home as a single parent? NMC Finance is an experienced mortgage loan broker and can help you explore all your options. Contact Nathan Coad on 0498 766 639 or nathan.coad@nmcfinance.com.au to find out more.
* This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.
