Introduction
If you’re a single parent looking to buy a home, understanding borrowing capacity is critical — but it’s also where most confusion happens.
Many people assume it’s just based on income. In reality, lenders assess a combination of income type, dependants, debts, and living expenses, and this is why results can vary significantly between lenders.
Why Different Lenders Give Different Borrowing Results
This is one of the most important things borrowers don’t realise.
Two lenders can give very different borrowing capacities for the same person.
This happens because lenders differ in:
- How they assess living expenses
- How they treat dependants
- What income they accept (and how much of it)
- Their interest rate buffers
- How they assess debts (e.g. credit cards, HECS)
👉 This is exactly why using a mortgage broker is valuable — brokers compare multiple lenders to find one that aligns with your situation, rather than you being assessed by just one set of rules.
Types of Income (And Why Structure Matters)
Not all income is treated the same.
Common income types include:
- PAYG (salary/wages)
- Self-employed (sole trader, company, trust income)
- Casual or part-time income
- Overtime, bonuses, commissions
- Child support
- Government benefits (Family Tax Benefit, parenting payments)
Why structure matters:
- Some lenders use 100% of base salary but discount bonuses
- Some lenders shade child support or exclude it entirely
- Self-employed income may be averaged over 1–2 years
This means your borrowing capacity isn’t just about how much you earn — it’s about how your income is structured and assessed.
Dependants: The Hidden Factor That Changes Everything
Dependants are one of the biggest influences on borrowing capacity — and often misunderstood.
Lenders assess:
- Number of dependants
- Ages of dependants
- Schooling (young children vs teenagers can differ in expense assumptions)
- Percentage of care (full-time vs shared care)
Why age matters:
- Younger children = childcare costs
- Older children = higher general living cost assumptions
Why care percentage matters:
- If you have full custody, lenders may apply higher living expenses
- Shared care arrangements may reduce assessed expenses (depending on lender)
👉 This is why two single parents with identical incomes can have very different borrowing outcomes.
Debts and Commitments
Lenders assess all financial commitments, including:
- Credit cards (based on limit, not balance)
- Personal/car loans
- HECS/HELP debt
- Buy Now Pay Later accounts
Reducing or restructuring debt may improve borrowing capacity.
Credit History (Often Overlooked)
Your credit history can influence:
- Whether your loan is approved
- Which lenders are available to you
- Your borrowing capacity
You can check your credit file for free through:
- Equifax Australia
- illion (Credit Simple)
- Experian Australia
Reviewing your credit file before applying can help avoid surprises.
How a Mortgage Broker Adds Value
Because lender policies vary so widely, a broker can:
- Compare borrowing capacity across multiple lenders
- Identify lenders that suit your income type and family structure
- Structure your application to present your situation clearly
👉 This is often the difference between “declined” and “approved” — or borrowing significantly more (or less).
