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Buying a property on your own

A record number of single women are taking the plunge and buying a property on their own. Sally Patten talks to the experts about mitigating some of the risks.

Recently released home-loan figures from mortgage broker Aussie piqued my interest – they were striking in a positive way. Individual females could soon overtake men in the home-buying stakes.

According to Aussie’s panel of 20 lenders, which includes the big four banks, in 2015 only 1178 more individual males than individual females took out a home loan. Two years earlier that gap was more than 2000, while in 2012 it was more than 4000.

In percentage terms, last year, individual women submitted 11.2 per cent of all mortgage applications, just behind individual men, who submitted 12.3 per cent of applications.

The figures suggest women are less inclined than ever to hang around and wait to find a partner before taking the plunge into the property market. Hooray for that!

Regardless of whether women are in a relationship, they need to think about – and manage – their own financial interests, experts say.

“Think about what is important to you. Be clear about your personal objectives. There has to be an element of: I have to look after myself,” Kate McCallum of advice boutique Multiforte Financial Services says.

“That said, you want enough flexibility to incorporate a relationship and someone else's financial interests into your own,” McCallum adds.

Don’t wait for a partner to turn up

Kellie Payne, an adviser at RI Advice Group Caloundra, notes that property is a big financial commitment and requires a large deposit, but she advises against waiting to buy a home with a romantic partner.

“If you want to get into property, you [generally] shouldn’t wait for the perfect partner to come along,” says Payne.

One way of achieving this might be by lowering your sights, and not trying to buy the best property in the best street and furnishing it perfectly, says Fiona Willard, a partner at Foundation Partners in Perth.

“So many people buy property in ‘Legoland’, as I call it, and over extend themselves,” she says. “They buy the perfect house in the perfect area. You don’t need to do that. And years ago, when our parents bought property, the furniture didn't all match. So what if you are sitting on beanbags? You can survive on shabby chic. And you can buy a lot of stuff second hand.”

Making it work for you

Of course there are risks involved in buying a property on your own, including that the value of your asset may fall, but – happily – there are also ways of mitigating some of them. Here’s six potential ways to help manage mortgage repayment risk.

  • Ensure you can afford repayments if interest rates rise from their current historic lows. To do this, work out what your monthly repayments would be if mortgage rates rose to, for example, 8 per cent.
  • Consider your insurance needs, such as taking out income-protection insurance which would pay out a regular income if you fell ill or had a nasty accident and were unable to work.
  • If you could no longer afford the mortgage for some reason, such as if you lost your job, and you have a spare room you could consider finding a tenant to help with the repayments, or, in the brave new world, you could advertise your place on an online lodging site such as Airbnb.
  • If buying a place in an area in which you want to live is too expensive, you could consider purchasing a cheaper investment property and continue to rent or live with family and/or friends.
  • You could buy a place with a family member or friends as tenants in common, which means that your share of the property will not automatically go to the other owners if you die. Such arrangements can be flexible from the point of view that individuals can have different portions of ownership. However, you would need a watertight agreement that covered exit plans.
  • Apply for a mortgage with an offset account. This is a transaction account that is linked to your home loan so the credit balance of the account is offset daily against your outstanding balance, thereby reducing the interest payable on the loan.

Ready to buy? Check out the ANZ Buy Ready™ checklist

Case study: How Niloufer King achieved housing security

Three decades ago, Niloufer King was newly divorced and on a sole-parent pension. She was also determined to buy her own property – however modest – rather than to rent or go into social housing.

King had half the proceeds from the sale of the marital home – but she had no job and, with an eight-month-old baby and a seven-year-old child to care for, no plans to return to the shiftwork of nursing.

“When my marriage split up 30 years ago I took my share and had a look where I could afford and moved there,” says King, now 59. “The local building society was happy for me to borrow $25,000 with no job as I had a $40,000 deposit” for a house that cost $65,000. (King was fortunate in terms of timing as it is unlikely that a loan would be approved in these circumstances today.)

A tight budget meant a move from Victoria to an unfamiliar and tiny township on the NSW mid north coast.

“Housing security is important to me,” says King. “My mother passed on that value. She didn’t know about getting a loan or buying a house or anything, but she did it by herself in the 60s so we had a secure roof over our heads. Way back then divorcees didn’t do that, but she was a registered nurse with a good job.”

King continued to own her own home as she returned to work, this time for Centrelink, and was promoted to positions in Port Macquarie and Bendigo. She had just moved into her dream home – a house on 20 acres – when she was involved in a catastrophic car accident on the Hume Highway outside Melbourne.

That was 10 years ago. She suffered a serious brain injury that left her temporarily blind and unable to walk. Four months in hospital and years of ultimately successful rehabilitation followed.

“I had to sell the property as I had a big mortgage on it,” says King. “I got on the internet and found something cheap enough to buy outright.”

Again, it was in country NSW – in a town with a pub and a post office. “It’s a nice, pleasant, friendly town and I’m pretty happy here,” says King, who is the deputy vice-president of the local Country Women’s Association of New South Wales and a former state Greens candidate.

“I've got housing security. I’ve done it all by myself. My philosophy is to put one foot in front of the other and keep going.”

Case study: Natasha Hughes

November 2016