The Pros and Cons of Buying on a Single Income

Buying on one income is more achievable than you might think

Your borrowing capacity on a single income might surprise you. Lenders typically assess your ability to borrow based on your net income after tax, existing commitments, and living expenses. A single income earner on $85,000 before tax could borrow somewhere between $450,000 and $550,000, depending on their lender, existing debts, and monthly outgoings. Add a low deposit scheme into the mix, and that borrowing capacity can translate into realistic purchase options across Melbourne's middle and outer suburbs.

The challenge is not whether you can borrow enough, it is whether you can save a deposit while managing rent and living costs on your own. Government schemes have shifted the focus from the traditional 20% deposit to much lower thresholds.

How the 5% Deposit Scheme works for single buyers

The Australian Government 5% Deposit Scheme lets eligible first home buyers purchase with just a 5% deposit. Housing Australia guarantees the difference between your deposit and 20% of the property value, which means you avoid paying lenders mortgage insurance. No income cap applies, and there are no annual place limits. Applications are made through a participating lender, not directly through Housing Australia.

In Victoria, the price cap is $950,000 for capital city and regional centres, and $650,000 for other areas. Both your purchase price and the lender's valuation must fall at or below the cap. You can use this scheme alongside Victoria's stamp duty concessions. A single buyer purchasing in Oakleigh South at $600,000 with a 5% deposit would need $30,000 upfront, plus settlement costs. That same buyer would also qualify for full stamp duty exemption under Victoria's concession, which applies to properties valued up to $600,000.

Consider a buyer earning $90,000 annually who has saved $40,000. Using the 5% Deposit Scheme, they purchase an apartment in Clayton for $580,000. Their deposit is $29,000. Settlement costs including conveyancing, building inspection, and miscellaneous fees total around $8,000. They move in without paying LMI and without stamp duty. Their loan amount is $551,000, and repayments sit at a manageable portion of their income because they have kept other debts low.

The stamp duty advantage in Victoria

Victoria offers a full stamp duty exemption on properties valued up to $600,000 for first home buyers. A sliding scale concession applies to properties valued between $600,001 and $750,000. Standard rates apply above $750,000. The exemption applies to both new and established homes, as long as the property will be your principal place of residence. You must move in within 12 months of settlement and live there for at least 12 continuous months.

Stamp duty on a $600,000 property would otherwise be around $31,000. That exemption is the equivalent of adding another $30,000 to your deposit without needing to save it. For single-income buyers, that difference can mean entering the market years earlier.

If you are looking at a property in Mount Waverley priced at $680,000, the sliding scale concession reduces your stamp duty bill to around $7,000 instead of the standard $36,000. The concession tapers off as the price increases, but the saving is still substantial.

Where single buyers are finding value in Melbourne

Outer eastern suburbs like Wheelers Hill, Glen Waverley, and Mulgrave offer a mix of apartments and older-style units within reach of single-income budgets. These areas are well connected by public transport and have established amenity, which matters when you are managing a household on your own. Proximity to employment hubs in Box Hill and the Monash precinct also keeps commute times reasonable.

In the southeast, suburbs like Clayton, Oakleigh South, and Cheltenham have median unit prices that align with the stamp duty exemption threshold. You will find a mix of one and two-bedroom apartments, often in smaller developments or older walk-up blocks. These are not prestige addresses, but they are functional entry points that allow you to build equity while living close to schools, shops, and train lines.

Brighton and Beaumaris sit at the higher end, and most properties there exceed the $750,000 concession cap. Single-income buyers targeting bayside locations typically need larger deposits or are looking at smaller units in older buildings.

Fixed or variable: which suits a single income better

A fixed rate gives you certainty over your repayments for a set period, usually between one and five years. That predictability helps when budgeting on a single income because your mortgage repayment does not shift with rate movements. The downside is reduced flexibility. Many fixed rate products limit extra repayments to around $10,000 to $30,000 per year, and you cannot access an offset account in most cases.

A variable rate gives you full flexibility to make extra repayments, access an offset account, and redraw funds if needed. Repayments will move up or down as the rate changes. If you have irregular income from bonuses, overtime, or side work, a variable loan with an offset account lets you park surplus cash and reduce the interest you pay without locking funds away.

In our experience, single-income buyers who have stable employment and tight monthly budgets tend to prefer a fixed rate for at least part of their loan. Splitting your loan between fixed and variable gives you some certainty on repayments while keeping the flexibility to make extra repayments on the variable portion.

How the First Home Owner Grant applies in Victoria

Victoria offers a $10,000 first home owner grant for new homes valued up to $750,000. The grant does not apply to established homes. A new home is defined as a home that has not been previously occupied or sold as a place of residence. It includes newly built houses, apartments, and units, as well as homes you build yourself on vacant land.

If you are purchasing an established apartment in Box Hill, you will not receive the grant. If you are buying a brand new townhouse in Nunawading for $720,000, you will. The grant can be used toward your deposit or settlement costs. It does not need to be repaid, and it can be combined with stamp duty concessions and the 5% Deposit Scheme.

Single buyers looking at new builds should confirm their eligibility early in the process. The grant is claimed through your lender or conveyancer as part of settlement.

What lenders look for when assessing a single income

Lenders assess your income, your existing debts, and your living expenses. They apply a buffer to your current interest rate to test whether you could still afford repayments if rates increase. Most lenders use a serviceability buffer of around 3%, which means if your rate is 6%, they test your ability to repay at 9%.

Your living expenses are estimated using either your actual spending or a benchmark figure based on the Household Expenditure Measure. If you have low declared expenses, lenders may still apply a minimum threshold. A single person with no dependents might have a minimum living expense estimate of $2,000 to $2,500 per month, depending on the lender.

Existing debts reduce your borrowing capacity dollar for dollar. A $15,000 car loan with $400 monthly repayments could reduce your borrowing capacity by $80,000 or more. Paying off small debts before applying for pre-approval can make a noticeable difference to what you can borrow.

Using a guarantor to increase your borrowing capacity

A guarantor loan allows a family member, usually a parent, to use the equity in their home as additional security for your loan. This can help you borrow more, avoid LMI, or purchase with a smaller deposit. The guarantor does not give you money. They guarantee a portion of your loan, which means they are responsible for that portion if you cannot make repayments.

Guarantor arrangements are common among single buyers who have stable income but limited savings. The guarantee is typically limited to 10% to 20% of the purchase price, not the entire loan. Once you have built enough equity in your property, the guarantee can be released.

If your parent owns a home in Burwood valued at $900,000 with no mortgage, they could guarantee $100,000 of your $500,000 purchase in Chadstone. You would borrow the full amount, but the lender holds security over both your property and a portion of your parent's equity. Once your property increases in value or you pay down your loan, the guarantee comes off.

The ongoing costs single buyers need to budget for

Beyond your mortgage repayment, you will pay council rates, water rates, strata fees if you buy an apartment, building and contents insurance, and ongoing maintenance. Strata fees in older apartment blocks around Melbourne typically range from $800 to $1,500 per quarter. Newer developments can be higher, especially if they include a pool, gym, or concierge.

Council rates vary by suburb and property value but expect somewhere between $1,200 and $2,000 per year for a unit. Water rates are usually quarterly and vary depending on usage. Insurance for a one-bedroom apartment might cost $400 to $800 per year, depending on the level of cover.

Maintenance is harder to predict. In an apartment, major works are covered by the owners corporation, but you will contribute through your strata fees and any special levies. In a standalone townhouse or unit, you are responsible for all internal and external maintenance. Setting aside $1,000 to $2,000 per year for unexpected repairs is a sensible buffer.

Call one of our team or book an appointment at a time that works for you. We work with single-income buyers across Melbourne and regionally, and we will walk you through your borrowing capacity, deposit options, and the schemes that apply to your situation.

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