Secret Women’s Business

Why have we included this section on our website? The answer is simple. Women play a very active part in the property market and we wanted to provide information and thoughts on how this relates to financing property purchases and perhaps dispel some myths about women and property finance.

I am writing this as a male, but also as a finance professional who has assisted many women over the years with their property ambitions, both singles and women in relationships and families.

We have split this section into three parts, single women, women buying with a partner and families. Whilst there are common threads through each sector, there are some noticeable differences.

1. Single Women

Over the past decade or more there has been a definite trend in single women purchasing property by themselves. The old adage of waiting for a partner before taking the plunge into property has is now old hat. Single women are now at least if not more likely to buy a property themselves than their male counterparts.

The nuts and bolts of property finance for single women are no different than with single males or couples. There a few key fundamentals that should be understood. The challenge as a single person is that you have the ultimate responsibility of understanding these fundamentals and making the decisions yourself. Whilst you can confer with friends, be aware that they may or may not have sufficient knowledge to give you meaningful advice. Basing your decisions on uninformed opinions can be costly if you get it wrong.

The key fundamentals to consider are;

1. Know your limits. Before you consider finding out your borrowing capacity, determine your own level of affordability. This is as simple as doing a household budget and determining how much you can afford to pay each month on loan repayments. Once you have determined this figure, find out your borrowing capacity. As long as your borrowing capacity is above this number you’re off to a good start.
2. Saving a deposit. As an absolute minimum, you will need at least 5% of the purchase price as a deposit and a further 5% to cover stamp duty, legal costs, lender fees etc. How will you accumulate or access these funds? If you are intending saving the money yourself, have you done a budget? Have you determined whether you will need to divert some of your current spending into savings and are you prepared to do this?

Do you have access to a monetary gift from parents or family to help you reach your savings target sooner? Have you considered talking to your parents about using a Family Pledge type of loan, which would involve them offering a property to help secure your loan?

1. Income stability. Taking on a home loan yourself means that you are totally responsible for the loan repayments and all the costs of owing a property. In considering this, how do you see your current income stability? Is your job at risk anytime soon? Are you readily employable if you did lose your job?

Do you have any fall back positions? Ie could you rent out a room or two in the short term, or could you move out and live cheaper elsewhere and rent out your property?

This is important in terms of your loan application as well. Lenders like to see stability of income and employment. If you’re changing jobs frequently, it is not always looked upon favourably. Whilst there are exceptions, being in your current position for twelve months or more, is a good start.

1. Financial Protection. As you are the sole source of income to fund the loan repayments and all property related costs, it is wise to consider protecting your financial position. If you couldn’t work because of injury or a major illness and your income stopped, what choices do you have? Will you be forced to sell your property because you can no longer afford the loan repayments? There are various types of cover that can be put into place to help guard against having to make these decisions. At the very least find out what they are, how much they cost and how they can protect your financial position.
2. The future. Whilst we can’t predict the future, have you considered how you will arrange your current property and associated loan if you meet a “significant other”? Do you intend keeping everything separate? What will you do if you decide to buy another property together? Will you need to sell yours to fund a deposit? At this early stage, it’s worthwhile to at least have a think about your options and what you may or may not be prepared to do.

 

2. Couples.

Buying a property as one half of a couple leads to some different considerations than buying as single women. Such as;

1. Property Ownership Structure. Often in a couple there is a disparity in the levels of income that each person generates. Statistics show that on average (but not always) men have higher incomes than women. This can be an advantage, depending on the actual situation ie.
2. If you are intending buying an investment property, some advice should be sought on the best way to structure the investment property loan and the property ownership. There are some tax advantages in getting this correct and taking advantage of the disparity in incomes and hence tax levels
3. If one half of the couple, has an occupation that is more open to litigation ie medical professional, finance professionals, or business owner, getting advice on the most effective structure for the loan and the property ownership may help to protect your assets in case of litigation.
4. Savings/Equity. As a couple rather than a single, saving a deposit should be a little easier as presumably you share costs and your overall cost of living is lower, giving a higher ability to save. You can also try living on one person’s income and saving the other persons. From a lending perspective, it doesn’t matter who’s account the savings go into, whether you have a joint account or an account each. The whole sum will be considered as part of the overall deposit.

If one of you has a significantly higher income that the other and hence a greater ability to save( and also make the future loan repayments), will you factor that into the share of ownership of the property?

3. Handling the Finances. In a couple, normally one person tends to be “in charge” of keeping track of the financial documents and payments. Have a think about how you want to manage this area. You may segment different tasks related to different areas of your joint finances to each party. Or, you may decide to keep everything separate and contribute to the various joint costs. There is no right or wrong way, figure out what works best for you both.

If I can stress one thing and that is not to take a backseat in your joint financial lives. Understand your joint finances. Know where the money comes from and more importantly know where it all goes. Make it a goal to match your level of financial understanding to your partners. Be actively involved.

It is worth considering your joint finances as a serious matter, as statistics show that one of the top reasons that couples, whether married or defacto part ways is because of financial differences. Getting your joint finances clearly defined and understood, can literally save the relationship.

4. Financial Protection. Much the same comments as for a single female. The added advantage in a couple is that you will normally have two income sources. But, if you take away one income source, particularly the largest one, will you be able to cope financially? If not get some professional advice.
5. Is there a family on the horizon? Whilst I realise sometimes this happens quicker than you may have planned, have you thought about the financial implications of having a family? As the female, it will impact you to a greater degree than your partner, but you will both have to work through the financial implications of a potential loss of income.

If the arrival of the family is planned well in advance then you have time to prepare your finances. Time to accumulate additional monies for that period of time when your household income will reduce. Whilst maternity leave will fill part of the gap, it’s a partial replacement for part of the time. Consider the longer term implications of a reduction in income and plan a readjustment of the family budget.

3. Families.

Providing security for your family is one of the principal reasons for buying a home. A place to settle into and create a safe happy haven for your family.

Some of the challenges that can arise when looking to buy a home when you have a family are a little different to buying as a single person or as a couple. These can be;

1. Costs of Children. This can be considered in two ways.
2. a. Firstly from a pure lending perspective, children lower your borrowing capacity. We have to include the living expenses associated with children and without doubt this lowers the amount you can borrow. Typically the more children the lower your borrowing capacity. This can be partially offset by Family Allowance payments if you are eligible, that we can include as eligible income. The children normally need to be under 13 to include this income.
3. Secondly, you will need to consider the real life costs of your children and how they impact the family budget. I would encourage you to complete an accurate budget from that budget estimate the amount you can afford to contribute to loan repayments. This is your real affordability number, regardless of a lender theoretical borrowing capacity.
4. Income variability. As the female it will typically be your ability to earn income that suffers more than your partners. This can range to the extreme of leaving the workforce for a period of time to have and raise children, through to simply reducing your work from full time to part time or casual.

Regardless of the type of change, your income will reduce. If you acquired your loan when your income was higher and now it has or will decrease, how will you plan for this reduced income? Will it be an ongoing part of your financial life for a number of years, or is it short term. How will you adjust your budget to suit?

3. What if the relationship ends? I mention this briefly here, because obviously it happens. What will you do? Who will keep the house? Do you have sufficient income to take over the loan yourself or will the house need to be sold?

For more information visit our Divorce and Property Settlement page.