In 2013, my now-wife and I went on our first date on Valentine’s Day. Now, we celebrate that milestone every year instead of our actual wedding anniversary.
We like to keep things simple – dinner out and a small gift exchange. No fancy trips, no grand gestures, just a quiet celebration of the day we met.
According to Roy Morgan, we are among the 3.8 million Australians who plan to buy a gift for their special someone this Valentine’s Day.
This year, Aussies are expected to spend a whopping $500 million. No biggie, just a casual half a billion on flowers, chocolates and maybe some unexpected heart-shaped things.
But you know what’s more romantic than buying a gift for someone? Buying property together. Because, let’s face it, while love is important, so is the ability to pay back a loan. Having two incomes in the equation makes that process a whole lot easier.
It won’t come as a surprise to anyone that having two incomes is often the ticket to cracking into the property market.
More money means more cash to pay back a mortgage. But hold on, before you start feeling like a single person is doomed to a life of renting and popcorn dinners, let me tell you something … it’s not the end of the world if you’re flying solo.
Being single might give you a little edge when it comes to borrowing power.
Without someone else’s living expenses to account for, you could end up with a stronger borrowing position than a couple.
Check out how the numbers shake out for singles vs. couples in different income brackets:
Notice the trend? It’s not until a couple earns a combined income of $200,000 that their borrowing power exceeds a single person’s. That’s right, lovebirds – when it comes to borrowing, singles sometimes have the upper hand.
Go ahead, try and argue with that.
But wait, there’s more! Even when kids come into the picture, singles still seem to be doing well:
As you can see, singles often have a little extra financial breathing room – especially at lower income levels.
So don’t fret if you’re not one of the 3.8 million Australians participating in this year’s Valentine’s Day gift-buying frenzy.
You can still get onto the property ladder, even if your date for the evening is a bottle of wine and Netflix.
I’m not saying that being single is the best option for property buying. Let’s not kid ourselves – two incomes are always better than one. But, my friend, if you’re doing it on your own, it’s still possible to realise that dream of homeownership.
Oh and here’s something interesting: if you shop outside the big four banks (CBA, NAB, Westpac, ANZ), you might be able to borrow up to 20 per cent more.
So go ahead, flirt with a smaller bank and see what happens.
One last thing worth noting is that yes, it is way too hard to get a loan in Australia.
The average full-time worker in Australia earns $100,000 today. After tax, they would receive $6,431 per month ‘in the hand’.
The maximum borrowing power for this work is $530,000, which, let’s face it, won’t get you much in most Australian capital cities.
The repayments on a $530,000 loan would be $3,329 per month, or just above 50 per cent of the take home pay.
Of this, the interest would be $2,844 per month, or roughly 44 per cent of the take home pay.
So, why are banks so stingy? They must assume that interest rates will increase by 3 per cent, and they calculate that borrowers will spend at least what their algorithms think they should. But here’s the kicker – if you’re frugal, responsible, and ready to make higher repayments, you’re basically being penalised for being smart with your money.
If they could afford to make higher repayments and are willing to do so to borrow more money and increase their buying power, it makes no difference.
I’m all for responsible lending, but it seems like responsible borrowers are the most penalised by ‘responsible lending.
It’s like getting punished for being a grown-up. How romantic, right?
Two incomes are certainly helpful, but it’s not the end of the world if you’re doing it alone.
And if all else fails, just remember you don’t need to be a couple to be a homeowner and a little chocolate never hurts.
