Divorce isn’t easy – neither is buying a home as a divorcee. Picture: iStock
If you’re recently divorced and looking to re-enter the property market, chances are, the odds are stacked against you.
You may have sold the family home and received a decent sum following the split, but higher property prices and a single income mean you’re probably now in a very different position to where you were all those years ago.
In fact, a divorcee is similar in status to a first homebuyer, says co-author of The Quick-start guide to your first property Rachelle Kroon.
“There’s probably a two-pronged thing, which is deposit and then affordability and that really is the same issue for first home buyers,” she says.
Co-author of The Quick-start guide to your first property, Rachelle Kroon. Picture: supplied
In the current market, Kroon, the director of Sphere Home Loans on the NSW Central Coast, has seen countless people walk away from partnerships with good deposits following the explosive growth of Covid. However, many simply can’t service the loan size they need to purchase in the same area again.
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“Even if you bought in 2019 we’re seeing the impact being just as big as if you bought 20 years ago because house prices have literally doubled in that time,” she says, adding that dropping to just one income makes it even worse.
You may find yourself limited to smaller properties in cheaper suburbs.
“It’s definitely tougher servicing on the bank’s calculator and in the real world on one income,” she says. “A couple on $100,000 each can borrow substantially more than a single on $200,000 a year.”
She says this is because the more you earn, the more your living expenses go up in a bank’s calculator.
“There really is a single’s tax,” she says. “It does impact, not only people’s decisions, but what they’re able to do.”
Two Red Shoes mortgage broker and founder Rebecca Jarrett-Dalton.
Sydney mortgage broker and founder of Two Red Shoes Rebecca Jarrett-Dalton says rising property prices means the cost of stamp duty has also shot up.
Three consecutive interest rate hikes this year has also pushed up the assessment rate.
“We’re testing affordability at the moment at about 9.2-9.5 per cent with our buffer on,” she says. “We’re also in a cost of living crisis. That means the mandatory minimum living expenses the lenders are looking at coming out of your budget, they are higher than they’ve ever been.”
HELP FOR SINGLE PARENTS
But while most people assume divorcees who have already owned a property don’t have access to government support like first homebuyers do, there are some schemes that may help, Kroon says.
There are government schemes for single parents that could help.
The government’s five per cent deposit scheme includes an initiative designed for eligible single parents that enables them to buy a home with a deposit of two per cent or more. The applicant must not have any other property interest once their new home settles and the purchase must be for a home to live in.
The federal government’s other first homebuyer scheme, Help To Buy, can be used by eligible single parents to help buy out the family home by entering into a shared equity arrangement with the government, she adds.
A NEW WAY FORWARD
Author of Finding Home Lucinda Hartley says before embarking on this new chapter of life, it’s important to take a step back and consider what home means to you and how you actually live before jumping into a new purchase.
Author of Finding Home Lucinda Hartley. Picture: supplied
“It’s really tempting to want to dive in immediately, but it’s likely if you’ve been through a divorce or separation that your new life chapter is going to look really different from the one that you came from,” she says.
While moving from a house to an apartment may seem like a downgrade for some, many consider it more suitable for their lifestyle – particularly if they are living close to amenities.
The numbers don’t always stack up well for single borrowers. Picture: iStock
There are also a range of alternative buying or renting options that aren’t well known, such as companies that offer zero per cent home loans, groups that can set up co-ownership structures and build to rent arrangements that offer better long term security than traditional renting.
THINKING OUTSIDE THE BOX
Jarrett-Dalton says she has seen a lot of single mums have their borrowing capacity impacted heavily following a split because they have a greater share in the custody arrangements and have to work part-time while receiving other types of government payments that lenders don’t accept as income types.
It can be distressing to sell the family home, but there are avenues for buying a new property.
“We’re seeing this type of person being locked out of the market,” she says.
She has seen people in this situation move back in with their parents and buy a smaller, more affordable investment property that they can look to pay off and move into by the time their kids have flown the nest. However, the government’s property tax changes may make such a strategy more challenging for many people to achieve, she says.
Kroon says she has had clients buy properties with their siblings or close friends in order to overcome affordability barriers. She also had one client who had a high income but received a lower share of the family home once it was sold who was able to purchase with a sibling guarantee.
MORE: Housing crisis forces new kind of family home
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